* Investors seek judicious allocation of Tencent windfall
* Investors wary of cash funneled into loss-making units
* Naspers' unit Prosus sold $15 bln worth of Tencent shares
By Promit Mukherjee
JOHANNESBURG, April 7 (Reuters) - Investors in Naspers Ltd NPNJn.J - Africa's biggest company - said on Thursday they want proceeds from a $14.7 billion stake sale in its Tencent Holdings 0700.HK investment to go towards blockbuster acquisitions or a share buyback.
Naspers' Dutch-listed subsidiary Prosus NV PRX.AS PRxJn.J sold a 2% stake in the Chinese gaming and social media giant on Thursday in the world's largest-ever block trade, reducing its stake to 28.9%. portfolio is dominated by Tencent, which owns China's biggest messaging app, WeChat.
Bob van Dijk, chief executive of both Naspers and Prosus, said on Thursday the stake sale created the financial flexibility to go for mergers and acquisitions, continue its on-going share buyback programme and explore other ways to create shareholder value.
A major acquisition could give one of Prosus' other business segments - classifieds, food delivery, fintech, payments or online education - a welcome boost, analysts said.
"We might see some deal announcements again in the next six months or the rest of this year," said Jean Pierre Verster, CEO of the South African hedge fund management firm Protea Capital Management, which holds shares in Naspers and Prosus.
Aside from acquisitions, Verster, who said Prosus had shown discipline in capital deployment after an earlier Tencent stake sale in 2018, said it could put Thursday's windfall towards another share buyback.
"That in my mind is very efficient capital allocation and that should decrease the discount because shareholders would gain a lot of comfort that management is allocating capital efficiently," he said.
Naspers spun off its international assets into Prosus and listed it in Amsterdam in 2019 to try to reduce a yawning discount its shares traded on the Johannesburg Stock Exchange (JSE) to the value of its stake in Tencent.
And in October, Prosus announced it planned to buy back $1.37 billion worth of Prosus shares and $3.63 billion worth of Naspers shares.
That has yet to reduce the discount.
At current share prices, Naspers is trading at a discount of 26% to the value of its roughly 73% stake in Prosus. Prosus in turn trades at a 22% discount to its stake in Tencent.
Peter Takaendesa, head of equities at Mergence Investment Managers, which also holds Naspers and Prosus shares, said he favoured another buyback over acquisitions, given that, aside from Tencent and its online classifieds, Prosus' other businesses are loss-making.
"Some of the proceeds should go to buy back shares, which may be a better way to deploy those proceeds instead of assets that we don't know how they're going to play out," he said.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.