The board of Prosus announced on Friday that it intends to acquire up to US$5 billion in total of Naspers and Prosus shares on the open market on a pro-rata (72.5%/27.5%) basis.
Through Prosus, global consumer internet company Naspers operates and invests globally in markets with long-term growth potential.
Prosus intends to launch the purchase following the release of its results for the six months ended 30 September 2020, expected to be on 23 November 2020. There will be a share repurchase consisting of an on-market Prosus ordinary share N repurchase programme of up to US$1.37 billion from its free-float shareholders, and an on-market Naspers N ordinary share purchase programme of up to US$3.63 billion.
The group sits on growth cash of about $10 billion and net cash of about $4 billion. The purchases will be funded from these cash resources.
Prosus intends not to vote the Naspers shares acquired. It is expected that the Naspers shares acquired will be held in treasury and will, therefore, be excluded from Naspers per share financial metrics.
Buying its own shares could be seen as a smart way to make the cash "work" for shareholders and does not mean the group is changing its strategy of investing in new internet companies and continuing with growth and value creation.
According to a statement issued by the group, the acquisition of the shares is a further step "to crystallise value" for shareholders and follows earlier actions such as the unbundling of MultiChoice Group and the listing of Prosus on Euronext Amsterdam last year.
The purchase of the shares also represents "a meaningful investment in the group's strong internet portfolio", according to the company, and it regards it as "a good use of capital" in the context of full market valuations evident in consumer internet mergers and acquisitions and the group's sizeable consolidated discount to net-asset-value (NAV)".
The impact of the global coronavirus pandemic has pushed internet valuations up, leading to more circumspection regarding potential returns on investments.
Basil Sgourdos, chief financial officer of Prosus and Naspers, said in a statement that, over the years, the group has achieved improved financial flexibility and built a portfolio of ecommerce assets with significant cash-flow generating capabilities. That means the group is now in a position to both invest in its asset portfolio, and to purchase its own stock when it makes sense from a returns perspective.
Bob van Dijk, CEO of Prosus and Naspers, says the group has found several large M&A opportunities in its sector to be fully priced and "have stayed disciplined".
"Utilising cash to own more of our current portfolio through a purchase of our own shares - when the discount to NAV is sizeable - is a sensible use of capital," commented Van Dijk.
"Management and the Naspers and Prosus boards are committed to delivering long-term returns for shareholders. We will also continue working on a series of initiatives to further address the consolidated discount to net asset value."