Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Today, <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> and <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a> surprised most of us by announcing a Proposed Voluntary Share Exchange Offer to Naspers Shareholders. The deal involves offering Naspers shareholders the chance to convert their Naspers shares to Prosus shares at a premium to the last trade and recent value, and offer "value" to Prosus shareholders via accretion.The resulting complexity is, however, less attractive. The initial response was to see the Naspers-Prosus spread tighten. The next response is to widen back out a bit. The coming days will tell you what the real response is. The response of the Prosus:NAV ratio is the more informative of the two. Eventually, the model accretion plus buyback accretion at Prosus should win shareholders over, and domestic Naspers shareholders should find the structure slightly attractive, but the call made clear that despite executives having spent a LOT of time on this, they clearly hadn't thought everything through.

Today, Naspers (NPN SJ) and Prosus (PRX NA) surprised most of us by announcing a Proposed Voluntary Share Exchange Offer to Naspers Shareholders. The deal involves offering Naspers shareholders the chance to convert their Naspers shares to Prosus shares at a premium to the last trade and recent value, and offer "value" to Prosus shareholders via accretion.The resulting complexity is, however, less attractive. The initial response was to see the Naspers-Prosus spread tighten. The next response is to widen back out a bit. The coming days will tell you what the real response is. The response of the Prosus:NAV ratio is the more informative of the two. Eventually, the model accretion plus buyback accretion at Prosus should win shareholders over, and domestic Naspers shareholders should find the structure slightly attractive, but the call made clear that despite executives having spent a LOT of time on this, they clearly hadn't thought everything through. 

Naspers & Prosus Exchange Offer - Accretion Vs Complexity

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

<div>On 22nd March 2018, after market close in Hong Kong one of the largest overnight placements was launched. On that day, <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> reluctantly sold US$10bn worth of <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a> shares.  I say reluctantly because Naspers provided a three year lock-up at the time of the deal. That lock-up will expire next week. </div><div>We have covered the previous placement in our earlier note, <a href="https://www.smartkarma.com/insights/tencent-placement-huge-deal-in-size-small-in-relative-terms-succumbing-to-the-holdco-discount" target="_blank" rel="noopener">Tencent Placement - Huge Deal in Size, Small in Relative Terms - Succumbing to the HoldCo Discount</a> and spoken about the implications of the lock-up expiry in our Feb 2021 note <a href="https://www.smartkarma.com/insights/tencent-placement-lock-up-expiry-us-10bn-block-and-buyback-linked-holdco-trade" target="_blank" rel="noopener">Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade</a>.</div><div>In this note, I’ll talk about the updates since then.</div>

On 22nd March 2018, after market close in Hong Kong one of the largest overnight placements was launched. On that day, Naspers (NPN SJ) reluctantly sold US$10bn worth of Tencent Holdings (700 HK) shares.  I say reluctantly because Naspers provided a three year lock-up at the time of the deal. That lock-up will expire next week. We have covered the previous placement in our earlier note, Tencent Placement - Huge Deal in Size, Small in Relative Terms - Succumbing to the HoldCo Discount and spoken about the implications of the lock-up expiry in our Feb 2021 note Tencent Placement Lock-Up Expiry - US$10bn+ Block and Buyback Linked Holdco Trade.In this note, I’ll talk about the updates since then.

Tencent Placement Lock-Up Expiry -  Block and Buyback Linked Holdco Trade Update

On Friday 30 October in the morning, <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a><a href="https://www.prosus.com/news/media-release-prosus-to-acquire-us%245-billion-of-na" target="_blank" rel="noopener">announced</a> that it would conduct a US$5bn buyback of Prosus shares and <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> shares (i.e. the subsidiary would buy shares in the parent to avoid passing down income from sub to parent which could be taxed). 
There were some pleasant, shareholder-friendly comments. 
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In total, Prosus will acquire up to US$5 billion in shares in Naspers and Prosus on the open market, starting after interim earnings are released on 23 November 2020. Purchases will be made on a pro-rata (72.5%/27.5%) basis in line with the economic stakes of both companies in the Prosus/Naspers asset base and Prosus would not vote shares purchased and they would come out of the per-share calculations for EPS and BVPS.
It isn't a lot in the grand scheme of things, but $5bn is $5bn, and the discount is quite wide, so this deserves a look.

On Friday 30 October in the morning, Prosus (PRX NA)announced that it would conduct a US$5bn buyback of Prosus shares and Naspers (NPN SJ) shares (i.e. the subsidiary would buy shares in the parent to avoid passing down income from sub to parent which could be taxed). 
There were some pleasant, shareholder-friendly comments. 



In total, Prosus will acquire up to US$5 billion in shares in Naspers and Prosus on the open market, starting after interim earnings are released on 23 November 2020. Purchases will be made on a pro-rata (72.5%/27.5%) basis in line with the economic stakes of both companies in the Prosus/Naspers asset base and Prosus would not vote shares purchased and they would come out of the per-share calculations for EPS and BVPS.
It isn't a lot in the grand scheme of things, but $5bn is $5bn, and the discount is quite wide, so this deserves a look.

Naspers & Prosus - A $5bn Catalyst Arrives

The Naspers spinoff of Prosus this past summer was much talked about on Smartkarma.
We got some things right and some things wrong. We got the general direction of some of the spreads right, though they did not move as much as expected. 
We got the index impact timing from selling of Prosus wrong, but that was in timing, not necessarily in quantum. Data subsequent to the index event shows the main expected seller sold little at the time but has been almost 30% of volume since (selling). 
The spread-widening from the actual spinoff can be broken down into component spreads, and doing so is highly instructive. The Just Eat bid was clearly important in spread dynamics. The post-spinoff large seller was probably also an important factor. 
There are some ongoing pressures which could widen Prosus/Basket, despite the fact that it is near post-spinoff wides. Furthermore, the Naspers selldown of Prosus shares last week which could enable a buyback on Naspers shares from its near-wides of 42% discount to look-through basket may have a good reason. There are long-term selling pressures on Naspers as well. 
We explore the movement, timing, and spread de-composition below.

The Naspers spinoff of Prosus this past summer was much talked about on Smartkarma.
We got some things right and some things wrong. We got the general direction of some of the spreads right, though they did not move as much as expected. 
We got the index impact timing from selling of Prosus wrong, but that was in timing, not necessarily in quantum. Data subsequent to the index event shows the main expected seller sold little at the time but has been almost 30% of volume since (selling). 
The spread-widening from the actual spinoff can be broken down into component spreads, and doing so is highly instructive. The Just Eat bid was clearly important in spread dynamics. The post-spinoff large seller was probably also an important factor. 
There are some ongoing pressures which could widen Prosus/Basket, despite the fact that it is near post-spinoff wides. Furthermore, the Naspers selldown of Prosus shares last week which could enable a buyback on Naspers shares from its near-wides of 42% discount to look-through basket may have a good reason. There are long-term selling pressures on Naspers as well. 
We explore the movement, timing, and spread de-composition below.

Naspers & Prosus Vs Basket Spinoff Plus Four Months - Where Do We Stand?

Quantitative Equity Analyst, DMA

Charlotte van Tiddens, CFA

Quantitative Equity Analyst

Technology-First Company

DMA is a technology-first company that provides an end-to-end SaaS solution to institutional investors. DMA enables regulated entities like asset managers, wealth managers, investment managers and financial advisors to connect their front and back office, break silos and reduce headcount.

<ul>
<li>Yesterday morning, Prosus announced the acquisition of Just Eat Takeaway for $4.3bn.</li>
<li>Naspers and Prosus sold off sharply on the news, ending the day down 7.7% and 7.8%, respectively.</li>
<li>Naspers’ discount widened by 2.8 percentage points to 44.2% and Prosus’ discount widened by 3.1 percentage points to 39.8%.</li>
</ul>


Yesterday morning, Prosus announced the acquisition of Just Eat Takeaway for $4.3bn.
Naspers and Prosus sold off sharply on the news, ending the day down 7.7% and 7.8%, respectively.
Naspers’ discount widened by 2.8 percentage points to 44.2% and Prosus’ discount widened by 3.1 percentage points to 39.8%.


Naspers & Prosus Sell off on JET Acquisition, Discounts Oversold Lifting Buyback Accretion

South Africa

Naspers Limited operates in the technology industry. The Company invests in global internet companies across the world.

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Naspers (NPSNY US)

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The Naspers spinoff of Prosus this past summer was much talked about on Smartkarma. We got some things right and some things wrong. We got the...

Travis Lundy

Naspers & Prosus Sell off on JET Acquisition, Discounts Oversold Lifting Buyback Accretion

Naspers and Prosus sold off sharply on the news of the JET acquisition yesterday morning. Both discounts widened, following a notable recovery...

DMA

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