Naspers $5bn share buyback plans signal unease with tech valuations
Dutch-listed investment arm Prosus, best known for its stake in China’s Tencent, says move is ‘a good use of capital’
South Africa’s Naspers signalled that the market for big consumer internet assets is running hot as its Dutch-listed arm unveiled plans to buy back up to $5bn of the two companies’ shares.
Prosus, the investment vehicle of Naspers with a listing in Amsterdam, said on Friday that the share buyback was “a good use of capital, given full market valuations evident in consumer internet M&A” and a large discount in the group’s $157bn market value versus the worth of its assets.
Europe’s biggest listed consumer internet group, Prosus is best known for its 31 per cent in China’s Tencent, worth some $238bn. Investors ascribe little value to its other internet investments ranging from Indian and Brazilian food delivery, online payments, and a stake in Russia’s mail.ru.
Naspers listed its international assets, including the Tencent stake, last year as Prosus. The vehicle has since entered Europe’s blue-chip Stoxx 50 index. Naspers, which is listed in South Africa, made the move after its own market capitalisation swelled to a quarter of Johannesburg’s stock market, leading to forced selling by investors.
Prosus has since also became a vehicle for dealmaking as Naspers seeks to expand in internet businesses such as food delivery and online classifieds. It has continued to make investments during the pandemic, but recently faced heady valuations on some bigger targets.
At the start of the year, the group’s all-cash bid for the UK’s Just Eat was trumped by a rival £6bn all-share offer from takeaway.com. Prosus also made a $9bn all-cash offer for eBay’s classifieds business this year before the US group instead opted to combine it with Norway’s Adevinta.
“We have found several large M&A opportunities in our sector to be fully priced and have stayed disciplined,” said Bob van Dijk, chief executive of both Naspers and Prosus.
Naspers has about $9bn in cash to fund buybacks and continue to pursue deals, as well as access to financing.
According to analysts at Jefferies, buybacks will help narrow the discount that shares in both Naspers and Prosus are trading at relative to their assets from about 40 per cent to 20 per cent.
Last year Naspers raised over $10bn from selling two per cent of Tencent, the first time it had reduced its stake since investing in what was then a small start-up in 2001. A lock-up on further Tencent share sales ends in March, but Naspers has signalled that it intends to retain its stake.
Prosus will launch the buyback after the release of half-year results next month and will target up to about $1.3bn of Prosus shares and $3.6bn of its parent’s, it said.