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.
Source: www.naspers.com, SENS: Publication of the Prosus Prospectus
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