The Naspers unbundling: our preferred option on behalf of our investors
The Naspers share price continues to trade at a discount relative to a ‘sum of the parts’ valuation of all the underlying businesses. Shareholders have therefore been putting pressure on Naspers management to find ways to unlock value by reducing this discount and bringing the share price more in line with fair value. The latest step in this process is the approved listing of Prosus, a new company comprising all of Naspers’ global internet businesses, on the Euronext in Amsterdam. This transaction presents two options for existing Naspers shareholders, which we explain below. Our preference, on behalf of our investors, is to choose option 1 (the default option). This option is to own one Prosus share for each Naspers share held.
Naspers management first unbundled its shareholding in MultiChoice before creating Prosus.
Prosus will incorporate all the global internet assets that Naspers currently holds (including its shareholding in Tencent) but will exclude its South African assets. Naspers will retain its primary listing on the JSE and will own approximately 73% of Prosus after the unbundling. Naspers will also continue to own all the South African assets (including, amongst others, Takealot, We buy cars, Property24, Media24 and Naspers Foundry).
The next step is the listing of Prosus on the Euronext Amsterdam, with a secondary listing on the JSE.
When this listing takes place, Naspers shareholders will have two options.
1. The default option, which is to own one Prosus share for each Naspers share owned.
Shareholders will, in addition to their Naspers shareholding, end up with the same number of inward-listed Prosus shares.
The transaction has no immediate tax implications for unit trusts or retirement funds.
However, individual investors who are direct shareholders (in other words, investors not invested via a unit trust fund) need to get tax advice on this option because it will trigger a capital gains tax (CGT) event. While this will have a potential cash flow implication for some investors, an annual amount of up to R40 000 of capital gains is exempt for tax purposes for the year.
We believe that the Prosus listing will unlock value for shareholders for several reasons.
a. The market will be compelled to value the local and international assets separately because they will be owned by two distinct companies.
b. The international listing of the global assets through Prosus will make these more accessible for a wider range of global investors, which is likely to create a fairer valuation of these assets, and therefore for Naspers.
c. Naspers has historically been too big for the local market, considering its weighting on the JSE. Investment managers therefore tend to limit their holding of the share. The listing will decrease the weighting on the JSE, while creating another listed entry point for investors via Prosus.
As shareholders with a long-term time horizon, we anticipate that the long-term investor benefits are likely to outweigh the short-term CGT cost for individual shareholders.
2. Option 2: Receive additional Naspers shares instead of Prosus shares.
This option has no immediate CGT impact. (CGT will only be incurred when these shares are eventually sold.) Investors who choose this option must elect to do so (as the default option is option 1 above). Shareholders who elect option 2 will receive an additional 0.36986 Naspers shares per Naspers share held .
Based on the above explanation, we have decided to accept option 1 on behalf of our clients.
As a shareholder, on behalf of the clients invested in the funds listed below, we accept Option 1.
• Denker SCI Equity Fund
• Denker SCI SA Equity Fund
• Denker SCI Balanced Fund
• Denker SCI Flexible Fund
• All institutional retirement funds
Figure 1: Important dates relating to the listing.
Source: www.naspers.com, SENS: Publication of the Prosus Prospectus
More about Prosus
The Prosus Group is one of the largest technology investors in the world and will be the largest consumer internet company listed in Europe after the listing. It operates in 89 markets, and is the market leader in 77 of those markets. The group has grown by investing in, acquiring and building leading companies. It typically focuses on large consumer trends where it tries to identify changes early, invests in and adapts proven business models for the high-growth markets it is focusing on, and leverages its skills, local knowledge and position to build businesses that have scale and benefit from local network effects. Prosus focuses on markets that present above-average growth opportunities (when compared to mature markets) due to their economic growth, scalability and fast-growing, mobile internet penetration levels.
Claude van Cuyck
Source: www.naspers.com, SENS: Publication of the Prosus Prospectus
The information in this communication or document belongs to Denker Capital (Pty) Ltd (Denker Capital). This information should only be evaluated for its intended purpose and may not be reproduced, distributed or published without our written consent. While we have undertaken to provide information that is true and not misleading in any way, all information provided by Denker Capital is not guaranteed and is for illustrative purposes only. The information does not take the circumstances of a particular person or entity into account and is not advice in relation to an investment or transaction. Because there are risks involved in buying or selling financial products, please do not rely on any information without appropriate advice from an independent financial adviser. We will not be held responsible for any loss or damages suffered by any person or entity as a result of them relying on, or not acting on, any of the information provided.
Sanlam Collective Investments (RF) (Pty) Ltd (SCI) is a registered and approved Manager in terms of the Collective Investment Schemes Control Act.
The information to follow does not constitute financial advice as contemplated in terms of the Financial Advisory and Intermediary Services Act. Use or rely on this information at your own risk. Independent professional financial advice should always be sought before making an investment decision. The manager retains full legal responsibility for the third party named portfolio. The Sanlam Group is a full member of the Association for Savings and Investment SA. If the fund holds assets in foreign countries and could be exposed to the following risks regarding potential constraints on liquidity and the repatriation of funds, macroeconomic, political, foreign exchange, tax risks, settlement risks and potential limitations on the availability of market information. A schedule of fees and charges and maximum commissions is available from the Manager, Sanlam Collective Investments, a registered and approved Manager in Collective Investment Schemes in Securities. Standard Bank of South Africa Ltd is the appointed trustee of the Sanlam Collective Investments Scheme.
Collective investment schemes are generally medium- to long-term investments. Please note that past performances are not necessarily an accurate determination of future performances, and that the value of investments / units / unit trusts may go down as well as up. Changes in exchange rates may have an adverse effect on the value, price or income of the product. Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in the portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of the portfolio and the investor will differ depending on the initial fees applicable, the actual investment date, and the date of reinvestment of income as well as dividend withholding tax. Forward pricing is used. Additional information of the proposed investment, including brochures, application forms and annual or quarterly reports, can be obtained from the Manager, free of charge. The Manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The performance of the portfolio depends on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-div date. The Manager has the right to close any portfolios to new investors to manage them more efficiently in accordance with their mandates. Lump sum investment performances are quoted. The portfolio may invest in other unit trust portfolios which levy their own fees, and may result is a higher fee structure for our portfolio. All the portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No 45 of 2002 (CISCA). The portfolio management of all the portfolios is outsourced to financial services providers authorized in terms of the Financial Advisory and Intermediary Services Act, 2002.