Q&A with Naspers CFO Basil Sgourdos

Naspers on Monday revealed plans to list a new global consumer Internet group on Euronext Amsterdam, with a secondary “inward” listing on the JSE in a move aimed at unlocking significant value for shareholders.

The company, called NewCo for now, will be made up of all of Naspers’s Internet assets outside South Africa, including its investments in online classifieds, payments, food delivery, e-retail, travel, education, and social and Internet platforms.

TechCentral editor Duncan McLeod spoke to Naspers chief financial officer Basil Sgourdos about the restructuring, what it means for shareholders and what happens next.

TechCentral: Did you consider doing a listing of the entirety of the Naspers business on a foreign bourse – in other words, having a primary listing abroad and a secondary listing on the JSE, or was it always the idea to structure it in this way?

Basil Sgourdos: Effectively, that’s what we achieve here because, effectively, it’s all our international assets, which accounts for 99% of the value. This was the most efficient structure to deliver that. It delivers a very efficient listing of our international assets.

Secondly, remember there is a switch-out of Naspers stock to this new stock – we can’t move the South African asset into an international primary listed stock with exchange control and a whole bunch of other things. It would add significant complexity to the execution.

So, we achieve exactly that in an efficient manner while honouring our exchange control and tax obligations.

TechCentral: In the absence of exchange controls, would you have done this differently?

Sgourdos: This works fine. What we have here is Naspers’s international assets listed on a large exchange, making it the largest European consumer Internet group and it’s great – it gives us the opportunity to go out and tell the story, one that includes high-growth assets both at the revenue and the profit line, and we think it’s compelling. So, no, we are very happy where we have come out at. We think this is the right approach and the right structure.

TechCentral: Why did you pick Euronext Amsterdam? Did you consider listing on other bourses as part of this process?

Sgourdos: Yes, I looked at every bourse across the world. This was a very important decision to make and was discussed in some detail by the board. There are a couple of reasons why (we chose Euronext Amsterdam).
First and foremost, we have a long history in Amsterdam — we have substance there, we have sizeable offices, we’ve been there from 1990, it’s a good place to attract and build talent.

Secondly, Europe is starved of large, global Internet companies and that’s what we bring with this listing. We will be three times larger than the next largest consumer Internet company in Europe and that is a compelling story – one that European investors have been looking to get behind but haven’t had the opportunity. We don’t have the same opportunity on some of the other bourses.

We looked at the index inclusions we would get, and it’s significant numbers of incremental inclusion. We’d get into the AEX 25, the Euro Stoxx 50, the Euro Stoxx 600, the MSCI developed market indices, the MSCI technology indices – there’s a whole bunch of indices that we would get into and that would attract significant incremental passive money that can’t currently come into Naspers.

The other thing is, the rules and regulations and governance in the Netherlands are very much aligned with those in South Africa, so this allows us to keep a very simple operating structure where the board, management and the operating structures can remain identical across the two companies.

TechCentral: The expectation here is that this is going to unlock significant value for Naspers shareholders. Do you have any guesstimates about how much value will be unlocked?

Sgourdos: It’s hard to tell because markets will be markets but let me explain why we’re going down this road.

There are many reasons for the discount that Naspers currently has. Over the last three years, we have worked really hard to address many of them, whether it’s the MultiChoice Group unbundling, whether it’s improving the growth of the profitability of our core e-commerce segments, whether it’s improving transparency and disclosure of what’s actually going on the business… But what we’ve done now is we’ve done a graph showing what happened to the discount relative to our weighting on the JSE, and those two lines are almost perfectly correlated. As our weighting on the JSE increases, our discount widens — almost a perfect correlation.
Why is that happening? Because as much as South African investors want to hold Naspers, they can’t, they are too exposed to a single stock. In a dynamic like that, it’s very hard for a market to ascribe value.

South African shareholders are 40% of our shareholder base right now. We won’t have that issue in Amsterdam. Although we’ll be the third largest company on that exchange and in the top 10 in terms of share-weighted indexation, we will not be anywhere near the 25% (of the JSE) we are now. What will happen is we won’t have these forced sellers as the valuation keeps going up.

With Naspers being a 75% shareholder of (NewCo), we hope that in time that value will also be reflected in Naspers.

TechCentral: Please take us through a timeline of events. What happens now, up to the listing of NewCo?

Sgourdos: We have to go to our shareholders at an EGM (extraordinary general meeting) and get approval. We then need to settle how we will allow for an orderly listing of the company so the listing lands well. Then we have to put together all the documentation that comes with a primary listing on a leading exchange – financials, prospectuses and other work.

TechCentral: And lots of regulatory filings as well?

Sgourdos: The good news is we have exchange control approvals for the transactions and have had constructive engagements with the JSE who are also comfortable with what we are doing.

TechCentral: And in the Netherlands, it’s just the usual listing regulations you have to comply with?

Sgourdos: Yes, which are amazingly very well aligned with the very strong regulations we have in South Africa.

TechCentral: Any guesses on when a prospectus might be out?

Sgourdos: No, I can’t speculate. We need to do our work and then come back and make the announcement in an orderly manner.

TechCentral: Lastly, NewCo is an interim name. When do you think you will rename it?

Sgourdos: It will definitely have to be in the prospectus. That’s ongoing work. We need to take it the board and they need to decide.  — © 2019 NewsCentral Media