Naspers, Prosus Post Strong Profit Growth

Investors worry about the complexity of the companies’ share swap deal to narrow the discount to its net asset value.

- Jaco Visser

Holding companies have traditionally struggled to narrow the gap between their net asset value and the price at which its stocks are trading on bourses. Naspers*, and subsidiary Prosus, are no different.

In a two-pronged move to address the substantial discount at which Naspers and Prosus are trading to their technology-laden assets, the companies announced a share buyback in November last year. By the end of June, Prosus has bought back in aggregate $1.37bn of its own ordinary N shares (or 0.73% of its total outstanding shares) and $3.63bn in Naspers ordinary N shares (or 3.67% of its total outstanding shares). These were sweet windfalls to investors.

In addition, Prosus announced a share swap on 12 May where it aims to acquire more than 45% of Naspers’ outstanding shares in exchange for its own. The rationale, in chief, is to increase Prosus’ free-float on the Johannesburg and Amsterdam stock exchanges and reduce Naspers’ weighting in South African stock indices where it holds a dominant position. Prosus offers 2.27443 of its own N shares for each one Naspers N share.