Naspers Prepares to List Global Empire From Ads to Tencent

(Bloomberg) -- When Naspers Ltd.’s Latin America chief cold-called Alec Oxenford in 2010, he got straight to the point: he wanted to buy a majority stake of the Argentinian entrepreneur’s online classifieds business.

Within weeks the deal was signed, but the OLX co-founder thought the partnership would last months rather than years.

“I thought it was just a big global media company coming over and they were going to conquer us,” said Oxenford, also the co-founder of Letgo, which later became another Naspers e-commerce investment. “Here we are, 10 years later, and planning on the next 10 years,” he said in an interview.

Oxenford’s OLX and Letgo are just two Naspers-owned internet ventures that will be carved out into a new $100 billion company called Prosus NV, which is due to list in Amsterdam on Sept. 11. Cape Town-based Naspers will still own about 73% of the entity after it lists, with the remaining shares to float freely.

The separation marks a turning point for Naspers, which has grown from a local newspaper publisher into Africa’s most valuable company with global investments in classified ads, food delivery, payments and education technology. The growth has been built on a 31% stake in Chinese giant Tencent Holdings Ltd., worth about $129 billion at current prices.

Naspers became a shareholder in Tencent when it invested just $32 million in the then-startup in 2001. The stake has long been worth more than the company itself, and a reason for the Prosus spin off is to attract more international investors and help narrow the gap -- if they value the rest of the business at more than they currently do.

Another motivation is that Naspers accounts for such a large portion of Johannesburg’s stock exchange -- about 25% -- that some investors have been forced to sell down the stock to avoid overexposure to a single company.

“It seems plausible that the Prosus listing will shrink the discount to the Tencent shares, as it reduces the impact of single-stock limits of JSE investors,” Bloomberg Intelligence analyst John Davies said by email. “But it doesn’t remove the other driver of the discount, which is that investors have not yet seen enough evidence that Naspers will invest its Tencent returns well.”

Investors who have met Naspers management on their Prosus roadshow have also been skeptical, with Ruan Stander, a portfolio manager at Allan Gray Ltd. in Cape Town, saying “this one corporate action” may not be enough.

Investors Doubt Naspers’ New Listing Can Fix Tencent Discount

The chance of Naspers making an investment decision as remarkably successful as Tencent is “vanishingly small,” Davies said.

But Chief Executive Officer Bob van Dijk is prepared to give it a good go, with the food industry “probably the largest opportunity I’ve run into in my lifetime,” he said.

The way people consume food will change “drastically” in the future, the CEO said, comparing home cooking to how people used to make their own clothes a century ago.

“The notion that people gather a bunch of ingredients from a shop and put things together three times a day, thirty times a month -- that’s not the way things are going to work anymore,” he said.

At the heart of that belief are investments in companies like India’s Swiggy. Its chief executive officer, Sriharsha Majety, says Naspers’s support has inspired newer investors, including Tencent, to also take the plunge. Swiggy has expanded rapidly on the back of smartphone adoption across India, and joins a Naspers food-delivery portfolio that also includes Germany’s Delivery Hero and iFood in Brazil.

Prosus companies are united in saying Naspers provides more than just financial support. Last year, Naspers sent a taskforce of as many as 40 people to Brazil to help iFood build out a new artificial-intelligence strategy, helping the company reduce prices by predicting where and when people will want a certain food.

--With assistance from Loni Prinsloo.

To contact the reporter on this story: Natalia Drozdiak in Brussels at ndrozdiak1@bloomberg.net

To contact the editors responsible for this story: Giles Turner at gturner35@bloomberg.net, John Bowker, Liezel Hill

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