Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

This summer saw the <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a> Offer for <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> complete in early August, with Prosus now owning just under 50% of Naspers and Naspers owning ~38% of Prosus in what <a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> called the new <a href="https://www.smartkarma.com/insights/naspers-prosus-south-african-keswicks" target="_blank" data-smartkarma-citation="insights:51401" rel="noopener">South African "Keswicks"</a> (a reference to the circular relationship of the Jardines complex, recently unwound, where for years/decades it just went on as the Keswick family thought was in their own interests.
Pre-Offer results, I reco'd going long the Naspers-Prosus spread where it was trading ex-Offer at 670bp or so in <a href="https://www.smartkarma.com/insights/naspers-deal-done-flex-participation-and-pro-ration-misunderstandings-and-index-changes-galore" target="_blank" data-smartkarma-citation="insights:56011" rel="noopener">Naspers Deal Done - Flex Participation and Pro-Ration, Misunderstandings, and INDEX CHANGES GALORE!</a> 
Just after the offer results were out and the initial index changes were made, the spread between Naspers and Prosus widened significantly to near (and briefly above) 20% against Offer Terms. I recommended unwinding the spread-widening trade and putting on a spread-narrowing trade in <a href="https://www.smartkarma.com/insights/naspers-prosus-initial-index-changes-done-now-to-reverse-the-trade" target="_blank" data-smartkarma-citation="insights:56256" rel="noopener">Naspers/Prosus Initial Index Changes Done, Now To Reverse the Trade</a>.
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So what next?

This summer saw the Prosus (PRX NA) Offer for Naspers (NPN SJ) complete in early August, with Prosus now owning just under 50% of Naspers and Naspers owning ~38% of Prosus in what David Blennerhassett called the new South African "Keswicks" (a reference to the circular relationship of the Jardines complex, recently unwound, where for years/decades it just went on as the Keswick family thought was in their own interests.
Pre-Offer results, I reco'd going long the Naspers-Prosus spread where it was trading ex-Offer at 670bp or so in Naspers Deal Done - Flex Participation and Pro-Ration, Misunderstandings, and INDEX CHANGES GALORE! 
Just after the offer results were out and the initial index changes were made, the spread between Naspers and Prosus widened significantly to near (and briefly above) 20% against Offer Terms. I recommended unwinding the spread-widening trade and putting on a spread-narrowing trade in Naspers/Prosus Initial Index Changes Done, Now To Reverse the Trade.






So what next? 

I said on Monday that I would have wanted to be long the <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> discount to <a href="https://www.smartkarma.com/entities/prosus-nv-2e2a2230-64b0-4044-b797-a3880fcb487a" target="_blank" data-smartkarma-citation="entities:28301:1" rel="noopener">Prosus NV (PRX SJ)</a> Exchange Offer Terms (i.e. short Naspers vs PRX) at 670bp which is where it was as I published <a href="https://www.smartkarma.com/insights/naspers-deal-done-flex-participation-and-pro-ration-misunderstandings-and-index-changes-galore" target="_blank" data-smartkarma-citation="insights:56011" rel="noopener">Naspers Deal Done - Flex Participation and Pro-Ration, Misunderstandings, and INDEX CHANGES GALORE!</a>That turned out OK.It traded to the 1600-1700bp level late in the day and appears to have closed at ~19% on a sharp move in both names at the South African close. The Dutch ticker for <a href="https://www.smartkarma.com/entities/prosus-nv" target="_blank" data-smartkarma-citation="entities:28104:1" rel="noopener">Prosus (PRX NA)</a> saw a substantial pick-up in volume after the South African close and the final print was on roughly €2.7bn of volume but the shares fell 1% in the last five minutes then 2.5%+ on the final print.  So that's done. It was good to be bearish. Now we look at the NEXT step. First, there will be SOME DATA collected on 20 August. It is not clear whether it will be disclosed on 23-24 Aug (some people will know it because it is paid data, but it may not be that publicly known, and I may not know it, even if I have a pretty good idea) or if it will be disclosed only on the first of September when OTHER DATA will be disclosed. At that time, I expect some people will be mildly surprised. There is a chance of STILL OTHER INPUT to be disruptive. If that happens, then there could be a flip-flop on the September event, and I will be surprised. But I rather expect any decision on STILL OTHER INPUT will be left until Q4 at the very earliest. Weirdly, the SOME DATA and OTHER DATA will cause Some People to do Some Things which will, interestingly, cause NEXT STAGE OTHER DATA to be created. That will in turn cause the above-mentioned Some People to do Some of the Same Things again in December.It is weirdly recursive, but that is the way the cookie crumbles.It is worth looking at how this shakes out.

I said on Monday that I would have wanted to be long the Naspers (NPN SJ) discount to Prosus NV (PRX SJ) Exchange Offer Terms (i.e. short Naspers vs PRX) at 670bp which is where it was as I published Naspers Deal Done - Flex Participation and Pro-Ration, Misunderstandings, and INDEX CHANGES GALORE!That turned out OK.It traded to the 1600-1700bp level late in the day and appears to have closed at ~19% on a sharp move in both names at the South African close. The Dutch ticker for Prosus (PRX NA) saw a substantial pick-up in volume after the South African close and the final print was on roughly €2.7bn of volume but the shares fell 1% in the last five minutes then 2.5%+ on the final print.  So that's done. It was good to be bearish. Now we look at the NEXT step. First, there will be SOME DATA collected on 20 August. It is not clear whether it will be disclosed on 23-24 Aug (some people will know it because it is paid data, but it may not be that publicly known, and I may not know it, even if I have a pretty good idea) or if it will be disclosed only on the first of September when OTHER DATA will be disclosed. At that time, I expect some people will be mildly surprised. There is a chance of STILL OTHER INPUT to be disruptive. If that happens, then there could be a flip-flop on the September event, and I will be surprised. But I rather expect any decision on STILL OTHER INPUT will be left until Q4 at the very earliest. Weirdly, the SOME DATA and OTHER DATA will cause Some People to do Some Things which will, interestingly, cause NEXT STAGE OTHER DATA to be created. That will in turn cause the above-mentioned Some People to do Some of the Same Things again in December.It is weirdly recursive, but that is the way the cookie crumbles.It is worth looking at how this shakes out. 

Naspers/Prosus Initial Index Changes Done, Now To Reverse the Trade

Today is the last day of trading for the Naspers Exchange Offer before it goes ex- tomorrow. A number of investors and traders will find it impossible to buy and offer their shares through normal settlement mechanisms and could only do so on swap as normal corporate action windows would have closed.That said, after a brief hiccup this morning, the spread is trading quite stably where it was yesterday at 4.8-5.3%. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/223/127/original/Screenshot+2021-08-10+at+7.16.18+PM.png?1628594193" class="editor-image img-responsive" data-smartkarma-image-id="223127"></figure></section>Going forward, the process of spread change, and flow impacts will hop around a bit, and this is a brief guide to that timing and expected influence.

Today is the last day of trading for the Naspers Exchange Offer before it goes ex- tomorrow. A number of investors and traders will find it impossible to buy and offer their shares through normal settlement mechanisms and could only do so on swap as normal corporate action windows would have closed.That said, after a brief hiccup this morning, the spread is trading quite stably where it was yesterday at 4.8-5.3%. Going forward, the process of spread change, and flow impacts will hop around a bit, and this is a brief guide to that timing and expected influence.

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.

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Today morning <a href="https://www.smartkarma.com/entities/prosus-nv-75c7a0c4-16ff-4433-a40f-25ae5b24077d" target="_blank" data-smartkarma-citation="entities:28498:1" rel="noopener">Prosus NV (PROSY US) </a>announced that it would acquire 45.4% of <a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)'s </a> issued N Share capital through a voluntary offer to be settled with newly issued Prosus Shares. This will result in Prosus owning 49.5% of Naspers, which in turn will still own 57.2% of Prosus.
In this note, we will look at the current structure revamp.
We have looked at Prosus in the past as a part of covering the Tencent placement, our last note was <a href="https://www.smartkarma.com/insights/tencent-placement-and-the-holdco-implications-deal-almost-done-now-what" target="_blank" rel="noopener">Tencent Placement and the Holdco Implications - Deal Almost Done, Now What?.</a>
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Today morning Prosus NV (PROSY US) announced that it would acquire 45.4% of Naspers (NPN SJ)'s  issued N Share capital through a voluntary offer to be settled with newly issued Prosus Shares. This will result in Prosus owning 49.5% of Naspers, which in turn will still own 57.2% of Prosus.
In this note, we will look at the current structure revamp.
We have looked at Prosus in the past as a part of covering the Tencent placement, our last note was Tencent Placement and the Holdco Implications - Deal Almost Done, Now What?.


Prosus/Naspers Holdco - Round Tripping US$46bn

China

Prosus N.V. provides internet based services. The Company focuses on investments in internet, digital media, e-commerce retailing, and consumer internet companies. Prosus serves customers worldwide.

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Prosus NV (PRX SJ)

Naspers/Prosus Spread - What Next?

The Naspers/Prosus reorg/Offer/Crossholding Structure was completed in early August. Index changes in mid-August, buyback program on Prosus started...

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The short Naspers long Prosus trade on the back end Monday worked a charm. Now it's time to reverse it. This was a trade of steps. Still is.

Travis Lundy

Naspers/Prosus - Now We Go Ex-Offer

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Travis Lundy

Naspers & Prosus Exchange Offer - Accretion Vs Complexity

Naspers and Prosus propose an Exchange Offer for 45.4% of Naspers to receive Prosus shares. Prosus will own 49.5% of Naspers. There is accretion,...

Travis Lundy

Prosus/Naspers Holdco - Round Tripping US$46bn

Prosus announced that it would acquire 45.4% of Naspers via a voluntary offer to be settled with new Prosus Shares. This will result in Prosus...

Sumeet Singh

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