Prosus raises R18bn through bond issuance
Netherlands-based Prosus, which recently lost its battle for delivery service Just Eat, will use the bulk of the cash to pay off a bond due in July 2020
Consumer internet company Prosus has raised $1.25bn (R18bn) through a 10-year bond, reporting high demand for its notes as it considers its options in the wake of losing a battle for delivery service Just Eat.
The intention of the issuance had been to redeem $1bn in notes due in July 2020, Prosus said on Wednesday, with the remaining funds to be used for general business purposes. Prosus had upped the issuance in the wake of high demand, with pricing at 3.680% for the notes due in 2030, compared to 6% for the notes due in July 2020.
Unum Capital trader Michael Porter said, “They raised cash at what they see as a preferential rate, and the market would be more focused on how they spend the money, for example, on a good merger or acquisition.”
For now it is difficult to say how Prosus will use the funds, he said — it could be for corporate purposes or settling debt in the future. That view from the market explained why there was no real price movement in Prosus's stock after the announcement, Porter said.
Prosus shares closed the day marginally down on Wednesday, trading 0.11% lower at R1,135.04 a per share.
Sasfin Securities senior portfolio manager Nesan Nair agreed with Porter. “Overall, I think it's a good rate,” he said, highlighting 3.68% per annum for 10 years compared to the SA government's US dollar 10-year bond, which is currently trading at 4.83%. “I think there is good appetite for good-quality corporate paper given that dollar rates are likely to remain low and these provide a healthy pickup,” he said.
Nair said Prosus would probably use the funds to focus on acquisitions in online payments and classifieds as per its stated strategy, but particularly on food delivery in the light of recent attempts to grow that business.
The bond issuance comes after Prosus, which was spun out of Naspers in September, recently lost its battle for delivery service Just Eat. Prosus has made clear previously that it is interested in building a rival delivery service to Silicon Valley giants Uber Eats and Amazon-backed Deliveroo.
Dutch firm Takeaway.com won the battle for Just Eat with a £5.9bn (R110.67bn) all-share offer that will create one of the largest meal delivery companies in the world.