Naspers’ strange Prosus game

Sasfin Securities deputy chairman David Shapiro said he wants to be a corporate advisor to Naspers and Prosus in his next life.

This perfectly describes the tremendous complexity Naspers created in an attempt to reduce its trading discount to its Tencent holding.

Naspers’ adventures with Prosus started in March 2019 when it announced its intention to list its international internet assets on Euronext Amsterdam.

There was growing shareholder pressure to narrow the discount to its underlying assets, notably the Chinese tech giant Tencent.

Some stakeholders even called for the unbundling of Tencent, but that would never fly when Naspers relied heavily on the Chinese company’s dividends.

Instead, it created Prosus, a separate entity based in Amsterdam where Naspers CEO Bob van Dijk feels at home.

Prosus was listed on Euronext Amsterdam on 11 September 2019, but despite gaining over 25% on the day of its IPO, it did little to narrow the discount.

It was in line with many analysts who highlighted that increased complexity has never resulted in unlocking shareholder value.

Instead of simplifying matters, Naspers doubled down by adding even more complexity through a share swap deal with Prosus.

For unknown reasons, Naspers believed that the cross-holding structure would reduce the discount between the asset value of the companies and their market capitalisation.

The deal was successfully completed in August 2021 and reduced Naspers’ stake in Prosus to 56.92% and gave Prosus an approximately 49% share in its parent company.

When this did not work, Naspers announced in June 2023 that it would remove the cross-holding structure to continue its share buybacks.

The market welcomed the decision to unwind the unnecessarily complex and ineffective cross-shareholding, which essentially reversed a bad move by the same management in 2021.

Therefore, Naspers’ management is removing the complexity arising from the cross-holding structure it created.

Merchant West Investments Value Fund manager Piet Viljoen said despite numerous bad decisions, the Naspers management team became fabulously wealthy.

“The new management team doesn’t listen, putting in place more ridiculous structures to keep buying time,” Viljoen said.

He said if Naspers’ management was truly concerned about creating shareholder value, they would unbundle their Tencent stake and give investors the full value of their holding.

Naspers and Prosus structures over the years

The image below shows how Naspers went from a simple holding company to having a complex cross-holding structure with Prosus – which it is now untangling.