Dutch-listed technology investor Prosus NV said on Tuesday it would end a cross-holding structure with its South African parent Naspers, sending both companies’ stock higher as investors welcomed the simplification.
“They (shareholder) said we don’t like this cross holding, it creates complexity. We’ve listened to them. And we’re basically getting rid of that now,” CEO Bob van Dijk told Reuters in an interview.
The announcement sent shares of both the companies up almost 10% in early trade. The companies also reported full year earnings which showed a fall in profit due to lower earnings at China’s Tencent, in which Prosus holds a 26% stake.
The cross-holding had been set up in 2021 via a share swap deal under which Prosus issued new shares to buy a 45.4% stake in Naspers, effectively moving part of Naspers from the Johannesburg bourse to Euronext in Amsterdam.
The deal had been aimed at shrinking a discount between the value of the two companies and that of their biggest asset Tencent, a software, gaming and social media giant.
It also reduced the weight of Naspers on the Johannesburg Stock Exchange (JSE) where it had made up more than 25% of blue chip indexes.
However it did not reduce the discount, forcing the company to launch a share buy back scheme last year which has had more success.
Several minority shareholders of Naspers were irked at the complexity of the cross-holding.
Van Dijk said the removal of the cross-holding structure means the company will be now able to continue share buy-backs for “many, many years”.
The company currently holds around $10 billion in cash.
“It is a relief that the group is reversing some of the previous convoluted structuring,” said Richard Cheesman, senior investment analyst with asset manager Protea Capital Management.
“It is unfortunate that it has been such a long journey with significant costs along the way,” he added.
Prosus’ net profit for the year ended March 31 fell to $10 billion from $18.6 billion, mostly due to Tencent.
Among e-commerce companies Prosus considers part of its core operations, revenue grew by 10% to $5.8 billion, the company said, while its trading loss increased to $617 million.
Reuters