Naspers: Addressing the Discount (Again). New Moves to Realize Value Are Having an Impact

Last Week in Event SPACE: Nissan, Naspers, Lynas, Xenith, Versum, Scout24, PCCW

Asia Long-Short PM/Analyst

Curtis Lehnert

Event-Driven

In 2001, <a href="https://www.smartkarma.com/entities/21085" target="_blank" data-smartkarma-citation="entities:21085:1">Naspers Ltd (NPN SJ)</a> made one of the most amazing deals the investment world has ever seen. It paid USD 32 million for a 46.5% stake in an unprofitable Chinese tech startup called <a href="https://www.smartkarma.com/entities/26" target="_blank" data-smartkarma-citation="entities:26:1">Tencent Holdings (700 HK)</a>. Today, that $32 million is equivalent to 7/10 of a basis point of the internet behemoth that <a href="https://www.smartkarma.com/entities/26" target="_blank" data-smartkarma-citation="entities:26:1">Tencent Holdings (700 HK)</a> has become and a 46.5% stake would be worth approximately $222 billion today. After stake sales and corporate actions over the past 18 years, Naspers retains a 31.3% stake in Tencent that is worth around $148 billion, making Naspers the most valuable local company listed in South Africa.The <a href="https://www.smartkarma.com/entities/26" target="_blank" data-smartkarma-citation="entities:26:1">Tencent Holdings (700 HK)</a> deal was overseen by newly appointed CEO, Koos Bekker. Koos rose to prominence by being a co-founder of Africa's first pay-TV company, M-Net (which happened to be one of Nasper's early investments). Koos is also responsible for consolidating and building Naspers interests in pay-tv businesses throughout Africa, businesses that remain under the company umbrella to this date. In April 2014, Koos stepped down as Naspers CEO and assumed the role of Chairman, a role he still maintains. His success at Naspers earned him much respect and a saying among South African business circles that goes, "You never lose with Koos".The restructuring deal that Naspers announced last month is a significant milestone for the company and has important implications for both <a href="https://www.smartkarma.com/entities/21085" target="_blank" data-smartkarma-citation="entities:21085:1">Naspers Ltd (NPN SJ)</a> and <a href="https://www.smartkarma.com/entities/26" target="_blank" data-smartkarma-citation="entities:26:1">Tencent Holdings (700 HK)</a>. In this insight I will discuss:<ul>
<li>What the deal means for Naspers and Tencent</li>
<li>Motivating factors for Naspers to restructure, including tax efficiency, closing the discount and Euronext governance</li>
<li>Implications for investors in either Naspers, Tencent or those looking at the deal</li>
</ul>

In 2001, Naspers Ltd (NPN SJ) made one of the most amazing deals the investment world has ever seen. It paid USD 32 million for a 46.5% stake in an unprofitable Chinese tech startup called Tencent Holdings (700 HK). Today, that $32 million is equivalent to 7/10 of a basis point of the internet behemoth that Tencent Holdings (700 HK) has become and a 46.5% stake would be worth approximately $222 billion today. After stake sales and corporate actions over the past 18 years, Naspers retains a 31.3% stake in Tencent that is worth around $148 billion, making Naspers the most valuable local company listed in South Africa.The Tencent Holdings (700 HK) deal was overseen by newly appointed CEO, Koos Bekker. Koos rose to prominence by being a co-founder of Africa's first pay-TV company, M-Net (which happened to be one of Nasper's early investments). Koos is also responsible for consolidating and building Naspers interests in pay-tv businesses throughout Africa, businesses that remain under the company umbrella to this date. In April 2014, Koos stepped down as Naspers CEO and assumed the role of Chairman, a role he still maintains. His success at Naspers earned him much respect and a saying among South African business circles that goes, "You never lose with Koos".The restructuring deal that Naspers announced last month is a significant milestone for the company and has important implications for both Naspers Ltd (NPN SJ) and Tencent Holdings (700 HK). In this insight I will discuss:
What the deal means for Naspers and Tencent
Motivating factors for Naspers to restructure, including tax efficiency, closing the discount and Euronext governance
Implications for investors in either Naspers, Tencent or those looking at the deal


Naspers (NPN SJ) Restructuring: You Never Lose with Koos