Johannesburg - Naspers shares tumbled yesterday after the media firm offered to buy London-listed internet trading portal Tradus for £946 million (R13.2 billion) to tap into the high-growth emerging markets of eastern Europe.
Tradus's directors all said they would recommend the offer of £18 a share, a 19 percent premium to its price on November 6, the day before Tradus announced the approach.
Naspers fell 10.2 percent to close at R162.50 in Johannesburg yesterday, valuing it at R63.7 billion. Tradus rose 12.03 percent to close at £18.15 in London.
Tradus provides online auctions and related services in 11 European countries. The platform connects buyers and sellers of goods via the internet.
Naspers, Africa's biggest media group, has aggressively expanded into emerging markets to compensate for slower growth in South Africa, where rising interest rates are slowing advertising spend.
Naspers acting chief executive Cobus Stofberg said yesterday that the proposed acquisition was in line with Naspers's growth strategy, with a focus on investments in internet services and in emerging markets.
The JSE- and New York-listed firm has identified Poland and central Europe as attractive markets and is finalising the acquisition of a controlling stake in Gadu-Gadu, a Polish internet firm, for about R1.1 billion.
Naspers has considerable print media assets in South Africa, and operations in Brazil, Russia, India, China and Greece. MIH houses its electronic media business, including pay television operator MultiChoice. Its internet businesses include internet service provider MWEB and online trading business Kalahari.
"Buying into a transaction platform allows MIH to further diversify its internet revenue stream, which currently has an advertising bias," Stofberg said.
Tradus would provide a platform to extend its business in central Europe and Russia.
Tradus operates primarily in eastern Europe. Its main business is in Poland, with additional operations in the Czech Republic, Ukraine and Russia. Tradus also operates in Denmark, Norway and Switzerland.
Earlier this year Naspers lifted its stake in Mail.ru, the top-ranked Russian-language e-mail service, to 33 percent.
Chief financial officer Steve Pacak said the internet market was the fastest-growing media segment, with many opportunities in emerging markets.
Rajay Ambekar, a portfolio manager at Cadiz African Harvest, said the Tradus deal was "enormous" compared with Naspers's recent transactions in the internet space.
This might be the reason for the fall in the share price, which wiped about R7 billion off its market value, he said.
Ambekar said: "Some of the concerns are that Tradus appears expensive on a forward price:earnings ratio of 50 times and that Naspers intends to buy 100 percent, which increases the risk." In previous acquisitions only a minority share had been acquired.
Pacak said Naspers planned to fund the transaction through a combination of existing cash, debt resources and equity. It has a R10 billion war chest.
The funding mix would be determined once the deal had been approved by Tradus shareholders in March, he said.
Ambekar said he would prefer Naspers to use debt and cash rather than issuing shares.
Naspers expected the acquisition to dilute core headline earnings in the short term.
Tradus's pretax profit in the half year to September rose 165 percent to £3.68 million.