Naspers to List Web Assets -- WSJ
May 30 2019 - 3:02AM
Dow Jones News
Africa's most valuable company looks to unlock the value in its
Tencent stake
By Alexandra Wexler
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 30, 2019).
JOHANNESBURG -- Africa's most valuable company said Wednesday it
will move forward with plans to list its huge internet assets in
Amsterdam, a bid to reduce the discount Naspers Ltd.'s shares trade
at relative to the value of its $122 billion stake in Chinese
internet giant Tencent Holdings Ltd.
The listing, scheduled for July 17, is at the early end of the
range the media and internet company had considered and would
instantly create a rare, large tech asset listed in Europe. It
would be the third-largest company on the Euronext Amsterdam
exchange and will hold Naspers's Tencent stake, as well as holdings
in Russian social-media operator Mail.ru Group Ltd. and U.S. online
marketplace Letgo, among others. Naspers had earlier said the
listing would happen in the second half of the year.
Investors reacted positively to the plan, with Naspers shares
rising 4.1% on the Johannesburg Stock Exchange. It is unclear,
however, whether the listing will successfully resolve the
discount. Investors can gain direct access to Tencent shares
through its Hong Kong listing.
With a market value around $94 billion, Naspers trades at a
discount to the value of its 31.2% stake in Tencent despite having
additional profitable businesses, such as its online classifieds
segment.
Analysts attribute part of the discount to a
dividend-withholding tax that would kick in should Naspers ever
sell its stake in Tencent and distribute the proceeds to
investors.
Naspers also says that many institutional investors in South
Africa have been forced to sell their shares in the company as it
grew because of rules limiting how much they can invest in a single
stock.
Naspers executives hope the new company, which remains unnamed
and is referred to as "NewCo," will reduce that markdown. NewCo
will have a book value of around $140 billion, according to
executives.
Much of the company's growth in recent years can be attributed
to the rise in value of its stake in Tencent, best known in China
for its WeChat messaging app. Naspers paid $34 million for its
original stake in 2001 and Tencent is now one of the world's most
valuable companies. Naspers sold 2% of Tencent last year, netting a
nearly $10 billion windfall.
Naspers on Wednesday said it would retain at least 73% of the
newly listed tech giant in Amsterdam, with the remaining shares
distributed among its existing shareholders.
Individual South African investors -- not funds -- will still
have to choose whether to pay an accelerated, or brought-forward,
capital-gains tax to get shares of the separately listed tech
assets or to instead receive additional Naspers shares on the
Johannesburg Stock Exchange.
Naspers has 61 million shares available for investors who don't
want shares of the new company, but Chief Financial Officer Basil
Sgourdos doesn't expect that too many investors will opt out of the
new company.
"We are quite confident the number will come in way below that,"
he said in an interview with The Wall Street Journal.
The listing also is expected to reduce the outsize weighting of
Naspers on the Johannesburg Stock Exchange -- the company currently
makes up about 25% of the JSE SWIX index -- allowing investors more
freedom to load up on the stock without having to worry about being
forced to sell down shares to reduce exposure as the company's
stock price rises, due to rules limiting how much they can invest
in a single company.
"That puts the share price under pressure and drives the
discount," Mr. Sgourdos said. "By lifting and shifting up to 27% of
our stock into NewCo, that provides some relief."
Naspers expects the listing of NewCo in Amsterdam to attract
more than $2 billion of passive capital thanks to its expected
inclusion in a number of leading indexes.
One thing investors are watching is whether Naspers will
eventually sell down more of its NewCo holdings into the Amsterdam
listing, creating a larger free float.
"Ultimately, the more shares that they can list on the Euronext,
the more liquidity it will attract," said Philip Short, an analyst
at Old Mutual Equities in Cape Town, South Africa.
Mr. Sgourdos said Naspers could decide at some point to sell
more shares into the Amsterdam vehicle "to free up cash for other
things," but that the focus for the moment was finalizing the
listing. He added, "We would have to be very conscious" of the
discount investors applied to its shares versus the underlying
stakes before making that decision.
Write to Alexandra Wexler at alexandra.wexler@wsj.com
(END) Dow Jones Newswires
May 30, 2019 02:47 ET (06:47 GMT)
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