Amsterdam-based technology investor Prosus NV announced plans on Wednesday to acquire up to 45.4% of shares in its parent Naspers of South Africa by issuing new Prosus shares in a deal aimed at moving part of the value of their massive stake in Tencent to Europe from Africa.
Naspers, which has a controlling stake in Prosus and would retain control, hopes the deal will improve valuations for both companies.
Both trade at a discount to the value of the massive 28.9% stake that Prosus holds in Chinese software and gaming giant Tencent Holdings, worth 172 billion euros ($208.6 billion) at current market prices.
"The share offer we have announced today will extend Prosus’s standing as Europe’s largest internet company," Bob van Dijk, CEO of both companies, said in a statement.
He said Prosus shareholders would benefit as the Naspers N shares Prosus will buy trade at a deeper discount to the value of the Tencent stake than Prosus shares do. In recent weeks Naspers shares have traded at a discount of around 25% to the Tencent stake value, while Prosus trades at a 15% discount.
Naspers shareholders should see their share price trade more in line with the value of the Tencent stake, and Naspers will remain the largest company on the Johannesburg stock exchange, the companies said.
They said they expect the deal to be implemented in the third quarter of 2021. Naspers has struggled with its relative dominance on the Johannesburg exchange and its shareholders have long lobbied for the company to reduce the valuation gap. Last month Prosus sold 2% of Tencent for $14.7 billion, in one of the largest strategic moves since its 2019 public listing in Amsterdam -- with both steps intended to manage the unwieldy Tencent stake.
The deal would increase Prosus's float on the Euronext stock exchange to around 42.8%, or an 60% economic interest in the underlying assets, from around 27% at present, making it eligible for inclusion among indexes of Europe's largest companies.
In addition to the Tencent stake, Prosus owns stakes in or operates an array of consumer internet companies, including the OLX online classifieds marketplace around the world, Swiggy in India and iFood in Latin America.