One thing to start: London’s top corporate lawyers took home record pay last year. Get the details here. Now on to the main event . . .
If you’ve ever made an online payment in India, ordered food delivery in Brazil or posted an online classified ad in Russia, the chances are you’ve used a Naspers company.
The company is better known for its stake in China’s Tencent, an investment that’s been a blessing and a curse.
Naspers’ initial $32m bet in the Hong Kong-listed gaming company and China’s WeChat, the giant messaging app, in 2001 is now worth a whopping $133bn, a return that mirrors SoftBank’s epic bet on Alibaba.
Just like SoftBank, Naspers trades at a discount to the sum of its parts. It is worth about $100bn — enough to make it the largest company in Africa by market capitalisation but more than $30bn short of the value of its Tencent stake.
The valuation gap, driven largely by the overwhelming dominance of the Chinese group, has overshadowed Naspers’ fast-growing internet empire.
To address its huge share price discount, the group is planning to list its Tencent stake and its global internet assets on the Amsterdam bourse in September under the name Prosus — which, just because it’s Latin for “forward”, doesn’t make it any less awful a name.
Overnight Prosus will become Europe’s biggest consumer internet company and take some of the weight off Naspers’ Johannesburg bourse listing, where the company represents just under a quarter of a share-weighted index of the biggest 40 companies.
But will that lift the company’s share price?
Naspers executives have long speculated that South African investors have had to offload some of its shares to keep their portfolios diversified as the company has become too big. Others argue, however, that investors are put off by its shareholder structure.
The group has an elite class of supervoting shareholders who have 1,000 votes each — 100 times more power than the ones Mark Zuckerberg uses to control Facebook.
Naspers says the control structure is used to prevent a hostile takeover. In reality, it leaves little room for manoeuvre if shareholders think Naspers is making poor investment choices.
Other people familiar with the structure say that it’s about reassuring Beijing that one-third of Tencent will stay in safe hands.
The rise of Naspers has spanned South Africa’s modern history — from a mouthpiece of the apartheid regime to becoming Africa’s own SoftBank — so what happens next matters to more than just the company’s shareholders. Go deeper with the FT’s Joseph Cotterill here.
China’s Star Market shines bright
It doesn’t matter what the company does. If it lists on China’s Star Market, the country’s latest answer to Nasdaq that went live on Monday, you’d better buy it.
Shares in some of the 25 companies that debuted to cheers in the financial hub of Shanghai rose by as much as 520 per cent. The average gain for the first day was 140 per cent.
Star is Beijing’s latest attempt to keep its technology companies at home — and to make sure they’re owned by Chinese investors.
For years the best and brightest groups such as Alibaba and Tencent have sought out overseas listings, where they pick up generous but sustainable valuations from global institutional investors.
The Chinese government has tried for more than a decade to bring them home: by taking them private from New York, or creating Chinese depositary receipts, and even banning certain types of companies from listing overseas (however, those groups have found an easy workaround through VIE structures).
Now that China and the US are locked in an intense battle over trade and technology, it’s all the more important, at least from Beijing’s perspective, that these tech groups stay local.
Here’s what regulators have done to try to attract companies and investors:
Unlike the main boards at the Shanghai and Shenzhen exchanges, stocks on Star will not require government approval to be listed.
They won’t have a limit on their price-to-earnings ratio like other Chinese listed groups.
Companies can list before they make any money and can also issue dual-class shares that preserve founders’ control over operations.
And perhaps most importantly: the market was personally announced and backed by Chinese President Xi Jinping, something akin to a Midas touch.
One final note: investors that have been eyeing the Chinese market for the past decade will remember that Star is not China’s first Nasdaq-equivalent. A decade ago in October the Shenzhen stock exchange launched its ChiNext board, branding it with much fanfare as the tech board of the future. The 28 companies that listed doubled their prices on the first day, the FT reported at the time. Unfortunately, the ChiNext index now trades at about 1,515 points, down from a high of about 3,900 in 2015.
Asahi takes another swig of AB InBev
We thought Carlos Brito may have had something else up his sleeve after he abandoned plans to list Anheuser-Busch InBev’s Asian business.
The seasoned dealmaker agreed on Friday to sell AB InBev’s Australian division, Carlton & United Breweries, to Japanese brewer Asahi for a cool $11.3bn.
Everyone’s happy, sort of. The world’s largest, and most indebted, brewer gets to chip away at its mammoth $106bn debt load and Asahi gets to expand away from its flat domestic market.
Well, everyone except Asahi’s shareholders. The Japanese company lost more than $2bn in market value as its shares tumbled 9 per cent on Monday.
Asahi is drenched in debt, after splashing out more than $11bn to scoop up Pilsner Urquell, Peroni and other brands from AB InBev back in 2016.
There’s no doubt that the Japanese group needs to expand away from its home market but investors are worried about the disinhibited price of 14.5 times 2019 ebitda for CUB. Meanwhile, AB InBev’s investors celebrated the offloading of the Australian business by marking up the shares 6 per cent on Friday.
It turns out pulling the company’s Hong Kong listing, which would’ve raised close to $10bn, may have been the right thing to do after all. Bankers at JPMorgan Chase and Morgan Stanley, who lost out on upwards of $192m from the IPO, are probably still crying in their beer, while advisers at Rothschild and Lazard, who were on the M&A deal, crack open a cold one.
More to come soon but get Lex’s view on the deal here.
Allison MacKinnon has joined RBC Capital Markets as a managing director. MacKinnon, who was previously responsible for debt capital markets at the Australia and New Zealand Banking Group, will lead the investment bank’s UK corporate DCM business.
Private equity firm BC Partners has added three new senior executives to its investor relations team. Fiona Anderson Wheeler, the director of investor relations at CVC, has joined as a principal in the firm’s London office. Audrey Hackett and Migo Terjanian will both be based in New York. Hackett was previously at GreenOak Real Estate while Terjanian joins from Littlejohn & Co.
Allen & Overy has hired Antoine Sarailler as a partner in the law firm’s investment funds team in the Paris office. Sarailler was previously a partner at Dechert.
Weil, Gotshal & Manges has added Paul Stewart as partner in its banking and finance team in London. Stewart was previously a banking partner at Ashurst.
Keeping it in the family Andrea Illy, third generation heir of the Illycaffè dynasty, plans on preserving the freedom of his company by refusing to sell, despite the pressures of globalisation and increased competition. (FT)
Personal private equity Amateur investors are setting up high-risk, high-return deals with their own private equity funds in an effort to capitalise on the booming industry. (NYT)
Learning a hard lesson Alphaville’s Thomas Hale walks readers through the £100m student accommodation scheme that went wrong. (Alphaville)
Deutsche’s D-Day Take a look into the origins of the most dramatic investment banking retreat since the fall of Lehman Brothers. (FT)