Naspers Returns to Bond Market to Fund Online Acquisition Plan

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Naspers Ltd. sold bonds for the first time in almost two years to fund emerging-market Internet acquisitions, a strategy that’s transformed the media group into Africa’s biggest publicly traded company by market value.

The newspaper, TV and e-commerce operator raised $1.2 billion partly to fund purchases, the Cape Town-based company said in a July 15 statement. The yield on the notes, due in 2025, has fallen 28 basis points to 5.22 percent since it was sold last week. That compares with an average of 7.35 percent among non-investment grade emerging-market corporate bonds, according JPMorgan Chase & Co. Indexes. The premium investors demand to hold the securities rather than comparable-maturity U.S. Treasuries narrowed to 278 basis points, from 310 at issue.

Naspers, under the leadership of billionaire Chairman Koos Bekker, is scouring the globe for new Internet acquisitions that will capitalize on the switch by consumers to smart devices for shopping, banking and other services. The company, which owns a 34 percent stake in Chinese Internet operator Tencent Holdings Ltd. worth about $64 billion, has online-service interests in about 40 countries and is Africa’s biggest seller of pay TV.

“Naspers may be looking to acquire or invest in an offshore asset and would need offshore funding for this to ensure a match of asset and liabilities,” Bronwyn Blood, a money manager at Cape Town-based Cadiz Asset Management, which doesn’t own Naspers bonds, said by e-mail.

Aggressive Expansion

Naspers, which also owns about 29 percent of Moscow-based social network company Mail.Ru Group Ltd., has increased annual development spending by 33 percent to 10.7 billion rand ($859 million) as it expands in online retail and targets new markets such as India, Nigeria, Brazil and Turkey, Chief Executive Officer Bob van Dijk said by phone on June 30.

The acquisition strategy is limiting Naspers’ profitability and keeping long-term and short-term debt at junk level, Fitch Ratings said in a July 17 statement. The company’s latest bond is rated at BB+ by Fitch, one below investment grade, and could be improved if development spending is reduced, the ratings company said.

While Naspers is Africa’s biggest seller of pay TV, broadcasting English Premier League soccer and U.S. dramas such as Mad Men to almost 8 million DSTV subscribers, the unit is dwarfed in value by its shareholding in Tencent. The stake, started with an initial $32 million investment in 2001, accounts for almost all of Naspers’ about $65 billion market value.

Long Term

Some of Naspers’ recent investments are long-term bets trying to compete with larger, international competitors. Flipkart, an Indian online retailer 19 percent owned by the South African company, is going head-to-head with Amazon.com Inc., which is investing $2 billion in the country. Travel site Ibibo, also based in India, is competing with Google Inc. and Kayak.com.

“In certain markets where they are trying to grow, it’s a winner takes all economy that prevails,” Rashaad Tayob, a money manager at Cape Town-based Abax Investment Pty Ltd., said by phone, declining to say whether Abax took part in the Naspers auction. “If they are minority shareholders in business which are cash hungry, then they need cash to follow funding rounds and support their businesses.”

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