the g spot
Q&A with Naspers CFO on Prosus separation
Prosus has clocked up its first week as a separate entity on Amsterdam’s Euronext, becoming that exchange’s third-largest company. We asked Basil Sgourdos if the separation has achieved what Naspers wanted
Prosus has clocked up its first week as a separate entity on Amsterdam’s Euronext, becoming that exchange’s third-largest company. We asked Naspers CFO Basil Sgourdos if the separation has achieved what Naspers wanted.
It’s still early days, right, there are some ways to go before the two lines settle; there are index moves, there are shareholders positioning themselves. But if we reflect on what’s happened in the first week or so, actually the overall prognosis is good. Before we announced this transaction, Naspers was trading at a discount to NAV of 45%. Today, if you look at where Prosus is trading, it’s roughly at a 20% discount, sometimes a bit less than that, and Naspers continues to narrow to about 35%.
So the combined impact is that discount has now come down to about 31%. That’s $20bn of value unlock for shareholders. That sort of value creation in a short period is not something to dismiss. It’s a meaningful positive for shareholders. It’s a start. It’s not the panacea, it’s not going to fix everything. We’ve engaged with shareholders after the listing and the general feedback has been very positive, and that’s underpinned by two things: 95% of shareholders voted in favour of the transaction at the EGM [extraordinary general meeting] and 96% of shareholders selected Prosus shares.
If you had the option now, would you buy Prosus or Naspers?
I am a shareholder and I elected Prosus. I think both shares are relevant: I don’t think it’s a trade of either or. I think what people must remember, in both these lines, the underlying net assets represented are the same. And if Naspers is trading at a wider discount, and you’re confident that management are going to continue working towards narrowing that discount, then why pay more for the same assets by buying Prosus? However, as an existing Naspers shareholder, the opportunity to unlock some value by converting some of your shareholding straight into Prosus is very clear.
Is it possible that the discount locally could gape even wider? Not everyone — including hedge fund manager Albert Saporta — was convinced that you’d deal with the discount problem by listing Prosus.
Nothing’s impossible in the world of capital markets. All I can do is address things well in my control. This is just one step. It’s an absolute tiny minority that had a different view. That said, the 4% or 5% that had a different view: we want to hear them, we want to understand their perspective. With regard to Mr Saporta, he’s not a significant shareholder, he doesn’t engage with us, he doesn’t talk to our investor relations team, so I don’t place any value on what he says.
Has there been anything that really surprised you about this whole process?
Look, we always believed this was the right thing to do. But it was just encouraging to see how supportive shareholders were and to see how well Prosus has done. We are not calling victory here; it’s early days. Now the work begins.
There’s a lot of speculation as to what Naspers’s next move is: whether it’s poised to sell its classifieds business, for example. Can you say what the plan is?
We’ve made no decisions. We need to engage our board, get their views, so there’s a bit of work to be done still.
Clearly, you would not find yourselves wanting if, instead of selling assets, you might want to buy some, given your ability to now attract capital. Are you in a stronger position to build and acquire?
The primary objective here was to address the discount, not to do big capital raises. Also, we have a very healthy balance sheet. We have gross cash of $9bn and net cash of $6bn, so we’ve got lots of room to grow and expand before we think about additional sources of funding. If there ever was something so compelling then of course we’d look at the equity option.
Are you seeing an impact on Tencent from the slowdown in China?
Tencent had a slower first quarter on the top line but that has picked up in the second quarter. I think they’ve figured out how to manage their gaming platform better and more sustainably. The thing with trade wars is that no-one wins. So then what you need to think about when you’re allocating capital is: who loses relatively less? It’s an unfortunate truth. So if you look at countries that are growing at 6% or 7% versus countries growing at 2%, then you say, well, maybe 6% becomes 4%, but it’s still growth.
So the long-term prospects for China and Tencent remain good. I really hope that reason prevails and we get back to more openness.