Prosus takes full control of Brazil’s iFood for €1.5bn

Prosus, the global internet arm of Naspers, inked a €1.5bn (R25.5bn) deal to acquire the remaining third of Brazil’s iFood that it does not already own, saying it is convinced about that business’s prospects.

The move is in line with what investors were expecting, receiving little market reaction on Friday. 

The acquisition from minority shareholder Just Eat also includes an earn-out agreement of as much as €300m, and is still subject to approval from that firm’s shareholders.

Prosus first invested in iFood in 2013, with that company starting as an online food ordering website in Brazil, transforming into a  platform business that includes grocery, quick commerce and fintech.

“The transaction is consistent with Prosus’ strategy to invest where it has high conviction, and is a natural next step in the long-standing relationship between Prosus and iFood,” the group said on Friday.

Market reaction to news of the deal was muted. The Prosus share price was 0.12% firmer at the close on Friday at R1,080. Its parent was down 1.9% in the same session. 

“Prosus believes this represents a great opportunity to secure full ownership of a high-performing cornerstone asset in the attractive Brazilian Food Delivery sector.”

Prosus, valued at R2.23-trillion on the JSE, has built a food delivery portfolio that also includes Swiggy in India and Delivery Hero, which operates across four continents.

The Naspers-controlled unit, which lost out on its bid to beef up its food delivery business through a takeover of Just Eat almost three years ago, had been expected to increase its stake in iFood as early as 2020 by market players surveyed by Business Day at the time.

Prosus’s aggressive £5bn (about R100bn) bid for Just Eat at the end of 2019 had highlighted its ambitious strategy to build a bigger food delivery business to take on Silicon Valley giant Uber Eats and Amazon-backed Deliveroo.

While R25bn is normally not a small number, it is when compared to the rest of Prosus's portfolio, largely anchored by the more than R1.8-trillion investment in Chinese internet giant Tencent.  

iFood “remains small in the context of the Prosus group as Tencent remains over 80% of value,” Peter Takaendesa, head of equities at Mergence Investment Managers, points out.

However, Takaendesa says this deal is an important strategic move within the group'sfood delivery segment “as it provides management with greater flexibility for value realisation longer term.” He adds that this is largely in line with their stated strategy “and most importantly the iFood transaction will not be funded from Tencent proceeds”.

Two months ago the Amsterdam-listed unit went back on its word not to sell more of Tencent’s stock for three years in June, saying it needed the money to fund a share buyback programme. 

The open-ended, long-term programme, the size of which was not disclosed, is the latest attempt by Prosus, alongside its parent, to crush a stubbornly wide gap between their market capitalisation and the value of their underlying assets.

Prosus also has interests in online classifieds, payments and fintech, and education technology, while also investing in areas including health, logistics, blockchain and social commerce.

gavazam@businesslive.co.za
gernetzkyk@businesslive.co.za