Africa’s largest company by market cap, Naspers, has a big problem: over-capacity and over-concentration of its shares in the Johannesburg Stock Exchange (JSE). When one company accounts for 25% of the total value of an exchange (from 5% just few years ago), that firm has a big problem. Why? The stock will tank because market forces will cease working for it, as most pension funds and institutional investors will not buy the stock to avoid over-concentration in a single company. These investing entities do have asset diversification guidelines and risk models they follow.
The African media giant Naspers, which owns almost a third of the Chinese online giant Tencent, is to make a European listing that will spin off that stake and other international investments such as its stake in Russia’s Mail.ru. Naspers will own 75% of the new company, which should be “Europe’s largest listed consumer internet company by asset value.” It will be listed on the Euronext Amsterdam and in Johannesburg (Fortune Newsletter)
So, even though the Naspers’ financial numbers can be looking great, more companies can only be selling to avoid that over-concentration in the hand of one company. That is partly why it listed MultiChoice as a separate company few weeks ago. But MultiChoice is not the real solution as the overweight from Naspers on the JSE remains evident.
So, Naspers has to have plans if it wants to keep adding value for investors. And it does: it will float its shares in the Euronext Amsterdam, assembling all those clusters of empires it holds in Russia, China and beyond in one entity thereby reducing the cage on the small JSE: “Naspers now intends to spin off its 31% Tencent stake, plus its investments into platforms such as Russia’s Mail.ru and Germany’s Delivery Hero, into a new company with a primary listing in the Netherlands and a secondary listing back home in South Africa”. Naspers will retain 75% of this new firm which is planned this year and the rest sold to global investors.
If it does that, values will accelerate and room will open up for South African investors to unload on Naspers. Of course, they may not as some of the fine pieces may not even be traded, in full, in Africa – the new Naspers in Europe will be traded as a secondary stock in the JSE. Yes, if you move the Tencent business exposure to Europe, what is there to buy? Today, the value of Naspers holding in Tencent is $133 billion but Naspers in JSE is worth less than $100 billion, implying that $33 billion is “not optimally” priced in. Add the other foreign businesses, and Naspers may be dissipating more than $50 billion in the translation process in the JSE. So, this new strategy is very good to unlock more values for investors.
Africa’s biggest media company, Naspers, is promising to create Europe’s biggest consumer Internet company with a listing later this year on the Euronext Amsterdam.
The South African firm has a long and varied history in print and broadcast media, but it really hit paydirt with a 2001 investment in China’s Tencent that turned $32 million into $175 billion. Naspers now intends to spin off its 31% Tencent stake, plus its investments into platforms such as Russia’s Mail.ru and Germany’s Delivery Hero, into a new company with a primary listing in the Netherlands and a secondary listing back home in South Africa.
The as-yet-unnamed spinoff, to be floated no earlier than the second half of this year, will include all of Naspers’s online stakes outside of South Africa. The mothership aims to retain around 75% ownership and will offer up the rest to global investors.
Simply, a great move as the best strategy is to ensure that investors do not sell your stock. If Naspers executes this strategy, it will unlock huge values for investors. The plan is magical to deal with market dynamics that cannot be fixed by better financial ratios. But, unfortunately, the best of Naspers will depart Africa, for Europe – and that is unfortunate, nonetheless.
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