Prosus on the hunt for acquisitions

Prosus NV is on the lookout for acquisitions after the Dutch e-commerce giant reported a 28% rise in first-half earnings and a net cash position of $4.3 billion.

The owner of global internet assets specializing in the likes of food delivery, payments and online education lost out on two high-profile takeover battles in the past year and maintains a strong liquidity position, according to a statement on Monday. As well as cash, Prosus has the ability to borrow and sold $2 billion of debt in July.

While prices have gone up for certain online assets, there are still growth companies available, Chief Executive Officer Bob van Dijk said in an interview. “We still find good opportunities, though some of them might be at an earlier investment stage rather than mature.”

Prosus shares rose 2.3% as of 9:36 a.m. in Amsterdam, valuing the company at 151 billion euros ($178 billion).

Prosus’s focus on e-commerce has proven effective during the Covid-19 pandemic, which drove demand for internet services around the world. However some sectors, such as online travel, were hit by a slump in demand for holidays.

While the longer term economic impact of the crisis is unclear, Prosus is “cautiously optimistic” about its prospects, the company said.

“We invested $600 million in our businesses in the first half, especially online food delivery and education,” Van Dijk told Bloomberg TV in a separate interview. Coronavirus lockdowns saw many people turn to online services that are likely to keep using them, he said.

At least another $600 million has been invested since September, Chief Financial Officer Basil Sgourdos said on a call with reporters.

Deals to have eluded Prosus include a battle for Just Eat Plc, which was eventually bought by NV, while EBay Inc.’s classifieds business was acquired by Prosus’s smaller Norwegian rival, Adevinta ASA, for $9.2 billion.

Prosus expects rapid growth in some of the areas it has invested in including education companies and online car sales in India, Van Dijk said.

Valuation Gap

Among challenges facing the CEO is a persistent gap in the company’s valuation and its crown jewel: A 31% stake in Chinese giant Tencent Holdings Ltd. The Amsterdam-listed company’s stock has gained 40% this year, but the Tencent shareholding is worth more at about 191 billion euros.

“Our investments are generating a great return — this is the most important component to us narrowing the discount,” Van Dijk said on a call.

This was also a problem for Naspers Ltd., the South African company that spun off Prosus in 2019 in part to try and reduce the discount. Prosus said last month it would buy back a combined $5 billion of shares in itself and Naspers in a move designed to boost shareholder value and try to narrow the gap, and will kick off the process Tuesday.

Naspers also reported first-half financials on Monday, and said earnings fell due to its now 73% shareholding in Prosus. Its shares gained 2.45% as of 10:25 a.m. in Johannesburg.

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Prosus on the hunt for acquisitions