Tencent’s biggest shareholder Prosus plans to sell 2 per cent stake valued at US$15.5 billion as it cashes in on lucrative bet

Zhang Shidong
·3-min read

Prosus, Tencent Holdings’ biggest shareholder, said on Wednesday that it plans to sell a 2 per cent stake in the Chinese social-media juggernaut to fund the expansion of its own online businesses, which have been thriving amid the global outbreak of Covid-19.

The company, which is listed in Amsterdam and Johannesburg, will sell up to 191.89 million Tencent shares to global investors through its subsidiary MIH TC Holdings, reducing its stake to 28.9 per cent, it said in a statement.

The sale will be valued at US$15.5 billion, based on Tencent’s last closing price. Prosus added that it was committed to not selling its remaining stake in Tencent for at least the next three years. Citigroup, Goldman Sachs and Morgan Stanley have been appointed as joint book runners to manage the transaction.

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“Through the sale of this small portion, Prosus intends to fund continued growth in its core business lines and emerging sectors, as well as [to] allow for complementary acquisitions,” Prosus said in the statement. “The Covid-19 pandemic has accelerated digital transformation across the group’s growth sectors, mainly online classifieds, food delivery, payments and fintech, education and e-commerce.”

Tencent shares dropped 3.8 per cent to HK$629.50 on Wednesday. The Chinese company had been informed of the stake reduction, according to Prosus. Tencent declined to comment when approached by South China Morning Post.

The divestment may remove one of the overhangs that have been holding back Tencent’s shares recently. The stock has fallen 18 per cent from a record high set in January, as rising US Treasury yields chip away at the appeal of high-flying technology companies and Beijing cracks down on the monopolies of such large companies.

The Prosus sale matches the March 2018 divestment by its parent Naspers, which reduced its Tencent holdings by 2 per cent for nearly US$10 billion, the first time in 17 years that the shareholder had pared its stake.

Tencent, which runs WeChat, may be required to put its fintech businesses, including digital payments, into a financial holding company that will face closer regulatory scrutiny, according to media reports. Its gaming business, one of its main revenue contributors, also faces headwinds, with regulators seeking to limit the time children can spend playing video games.

Tencent has, however, proved to be resilient, with Covid-19 social distancing measures prompting people to spend more time at home, order merchandise online and communicate more through social media. Its fourth-quarter profit increased by a faster-than-expected 175 per cent from a year earlier to 59.3 billion yuan (US$9.1 billion), exceeding analysts’ estimates by 80 per cent. Its revenue rose 26 per cent.

Tencent’s shares have risen 12 per cent this year, outperforming a 5.3 per cent gain by the benchmark Hang Seng Index in the same time span.

Additional reporting by Iris Deng

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