Tencent shareholder Naspers plots Euronext e-commerce listing
today Mar 25, 2019
Tencent shareholder Naspers plans to float a portion of its e-commerce ventures on Euronext in Amsterdam, a move South Africa’s biggest company said on Monday will create a $140 billion European internet giant.
As well as a one third stake in China’s Tencent, which is worth around $134 billion, Naspers - via its e-commerce business - also owns stakes in OLX, the biggest classifieds ads site in India and Brazil, and mobile classified platform letgo, which vies with Craiglist in the United States.
Naspers did not give financial details of the listing, which is penciled in for the second half of the year.
But chief financial officer Basil Sgourdos said the new entity was likely to be the third largest on Euronext, above oil giant Total, which is valued around 130 billion euros.
“We bring a very unique story to Europe. We bring Europe’s largest consumer internet company. Europe has been starved of global internet investment opportunities,” Sgourdos said.
Founded more than 100 years ago in the Stellenbosch winelands of South Africa, Naspers has transformed itself from a newspaper publisher into a $100 billion empire, thanks to its one-third stake in Tencent.
The stake is a money spinner for the group but has also become a headache for Chief Executive Bob van Dijk, because it dwarfs Naspers’ own market capitalization by almost 30 percent.
As part of efforts to narrow the gap, van Dijk spun out and separately listed the company’s de facto African pay-TV monopoly Multichoice, a company valued around 50 billion rand, last month.
Sgourdos said that the decision to also separately list its internet investments in Amsterdam would go a long way in narrowing the valuation gap because Naspers’ oversized weighting on the JSE was to blame for the discount.
“As our weighting in the index went up, our discount widened. Why? Because South African funds cannot have single stock exposure of 25 percent. So as much as they love Naspers, they can’t hold it,” he said.
Sguordos said the new entity, which is yet to be named, was valued at roughly $140 billion, based on a mean consensus of analysts’ estimates.
Naspers accounts for about a quarter of the JSE’s value, a headache for local fund managers who have been forced to sell the stock when its valuation rises to limit their exposure.
Some analysts doubt whether the Euronext move will have much of an impact in narrowing the discount, with Jeffries’ Ken Rumph saying part of the problem was some investors did not believe Naspers could turn the internet businesses into profitable enterprises.
“Amsterdam may be slightly more... of a congenial home but does that really change anything? Or will people still think this is some assets that we’re not sure we will ever see their value? To me that’s the real problem with Naspers,” Rumph said.
The e-commerce businesses generate $3.3 billion in annual earnings before interest, tax, depreciation and amortization, from sales of nearly $16 billion, with Tencent accounting for virtually all the profit.
The new entity, which will have a secondary listing in Johannesburg, will house stakes from some of the biggest internet brands in emerging markets including Russia’s biggest social networking site mail.ru, Indian online travel firm MakeMyTrip and Brazilian food delivery firm iFood.
The new company is expected to be owned 75 percent by Naspers and have a free float of 25 percent when it lists in the second half of the year.
Naspers’ problems mirror the dilemma faced by Yahoo, where its core business ended up being worth 10 times less than its stake in Alibaba and Yahoo Japan.
Yahoo fixed that by selling its core operating business to Verizon in 2016 and re-branding what was left as Altaba, a conflation of ‘alternative’ and ‘Alibaba’.
Shares in Naspers fell 1.6 percent to 3,222.63 rand as of 1443 GMT.
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