Introducing Prosus: A Rare European Mega-Tech Stock

Shares in an internet conglomerate that is the largest shareholder in China’s Tencent Holdings Ltd. soared Wednesday, after listing its assets under the name Prosus NV in Amsterdam—instantly creating a rare European tech giant.Prosus, which is made up of the international internet assets of South African holding company

Naspers
Ltd.


NPSNY 3.07%

, gives Europe significant exposure to a fast-growing, consumer-facing tech company.

Shares in Prosus were trading up more than 25% at €74.56 ($82) each in European trading on Wednesday morning, from a reference price of €58.70 a share provided by Naspers, making Prosus one of the most valuable companies in Europe by market capitalization, valued at around $133 billion. Europe lacks its own tech giants. Business process software maker SAP SE has a market capitalization of around $148 billion, but doesn’t have a consumer-facing focus.

A Better Play

Naspers trades at a discount to the value of its stake in China tech giant Tencent.

The Prosus Amsterdam listing aims to reduce that discount

If the valuation holds up, however, Prosus would end the day as one of the 15 largest companies in Europe by market cap, between oil giants

Total
SA

and

BP

PLC, according to FactSet. It is the third-largest company on the Amsterdam exchange after

Royal Dutch Shell

PLC and consumer giant

Unilever

NV. Prosus owns a nearly one-third stake in the Chinese internet and gaming colossus Tencent, as well as holdings in Russian social-media operator Mail.ru Group Ltd., German food-delivery business Delivery Hero and U.S. online marketplace Letgo, among others. The listing, which didn’t raise any new money from investors, appeared to succeed in narrowing the discount investors slapped on South Africa-listed Naspers compared with the value of its Hong-Kong listed Tencent stake. The Tencent stake, now housed in Prosus, is worth more than $131 billion on paper. Naspers has long traded for less than that, despite having additional profitable businesses, such as its online classifieds segment. Investors applied a discount on Naspers shares compared with its Tencent holding because Naspers would need to pay a dividend-withholding tax should it ever sell its stake in Tencent and distribute the proceeds to investors. Another reason is lack of liquidity. Investors can also gain direct access to Tencent shares through its Hong Kong listing. “The discount on the Prosus listing is a lot narrower than the discount on the Naspers listing,” said Hannes van den Berg, co-head of South African equity and multiasset at Investec Asset Management. For the Naspers investor, “Am I better off today than I was yesterday? Yes.”

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Naspers executives said the company had become too big for its home on the Johannesburg Stock Exchange—where it comprises about a quarter of the benchmark JSE SWIX Index. They wanted to develop a new investor base by trading its shares in Europe, where large, listed tech companies are scarce. Founded in South Africa in 1915, Naspers was originally De Nationale Pers Beperkt, or the National Press Ltd., which produced a Dutch-language newspaper for the country’s Afrikaner population. In the 1980s, the company began expanding beyond its publishing roots, including into video entertainment. Naspers paid $34 million for its original Tencent stake in 2001, and Tencent is now one of the world’s most valuable companies. Naspers sold 2% of Tencent last year, netting a near $10 billion windfall. Much of Naspers’ growth in recent years can be attributed to the rise in value of its stake in Tencent, best known in China for its

WeChat


TCEHY 1.80%

messaging app.

Bob Van Dijk, chief executive of Naspers Ltd., at the opening of trading for Prosus at the Amsterdam Stock Exchange on Sept. 11.

Photo:

Jasper Juinen/Bloomberg News

Late last year, Naspers led a $1 billion funding round in Swiggy, India’s largest food-delivery platform and committed $400 million in funding for iFood, the leading online food-delivery platform in Latin America. In the U.S., in addition to Letgo, a competitor of Craigslist Inc., Naspers has made bets including Honor, an online network of home-care agencies for the elderly, FarmLogs, which provides technology solutions for row-crop farming and Udemy, an online learning marketplace. For the Amsterdam listing, existing Naspers shareholders in South Africa are issued one Prosus share for each Naspers share. Individual investors in South Africa have the option to receive an additional Naspers share in lieu of the Prosus share, which might be more attractive to them for tax reasons. Those shareholders have until Friday to make that decision. Naspers plans to retain at least 73% of Prosus, with the final amount expected to be announced on Monday after South African individual investors submit their decisions. Write to Alexandra Wexler at alexandra.wexler@wsj.com

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