Another Lost Deal Shows Naspers Growth Machine Is Stumbling

JOHANNESBURG (Capital Markets in Africa) — The big deals that Prosus NV should be winning is slipping through its fingers.

Late last year, Takeaway.com NV trumped Prosus’s bid for Just Eat Plc. Now EBay Inc.’s classifieds business is being scooped up by Prosus’s smaller Norwegian rival, Adevinta ASA, for $9.2 billion.

It’s not a great start for a company set up to be a deal machine. Prosus was spun off from South African tech company Naspers Ltd. in September with a stable of promising e-commerce businesses, big ambitions and plenty of cash for takeovers.

Those bold intentions were on display when EBay set up an auction of its classified ads unit and Prosus weighed in with the highest cash bid, according to people familiar with the matter. It was still in pole position going into the weekend, yet ended up losing out to a company whose market capitalization was around one 20th of its own.

EBay’s board had an eleventh-hour change of heart and ditched its plan for an outright sale so it can keep a stake in the business, said the people, who asked not to be named as the deliberations are private. This would also potentially avoid the huge tax bill from an outright sale and keep some exposure to an asset that’s riding high since virus lockdowns pushed more economic activity online, they said.

Adevinta poses less of a competitive threat to EBay than Prosus in important markets such as Germany and the U.K. Prosus executives were unwilling to add sufficient cash to compensate EBay for those concerns, the people added.

Naspers hoped its classifieds, online food delivery and payments activities across the globe would be worth more if it hived them off into a new entity and spun it off, while holding onto almost three-quarters of the business. While Prosus shares have risen 16% this year and the company has made a handful of smaller acquisitions, it’s not been enough to narrow a discount in value between Naspers’ own market capitalization and its stake in Chinese internet giant Tencent Holdings Ltd.

Investor concerns that Prosus may overpay in M&A deals is one reason the company isn’t worth more, Goldman Sachs analysts said in a recent note. Prosus shares were up 5.4% at 12:53 p.m. on Tuesday in Amsterdam and Naspers rose 5.8% in Johannesburg. That pales in comparison to Adevinta, whose shares rose as much as 39% after announcing the EBay deal.

Prosus should spend its money on taking bigger stakes on its existing businesses and investing in their growth, said analysts at New Street Research. One of those is Brazil’s iFood. Prosus already owns most of the company and is in talks to acquire another 33% of the Brazilian online food delivery business, Bloomberg reported in early July.

Source: Bloomberg Business News