E-commerce group Prosus raises US$2bn through debt offering to bolster its acquisition plans

SOUTH AFRICA – Prosus, an e-commerce group, has raised more than US$2 billion (R33bn) through an over-subscribed debt offering to bolster its acquisitions plans amid industry consolidation and Covid-19.

Prosus, which listed on the Euronext Amsterdam and JSE last September, said that it had raised the money through debt, comprising its longest-dated dollar offering.

It said the purpose of the offerings was to raise proceeds for general corporate purposes, including potential future merger and acquisition activity, as well as to further augment the company’s liquidity position.

Takaendesa said Prosus was strengthening its balance sheet as it eyed new opportunities amid consolidation in the e-commerce sector.

“Tech firms in high-growth segments of the market are not cheap at present. Prosus has not been successful in recent bids, as it can’t use shares in transactions and target asset valuations are not cheap,” Takaendesa said.

“With the three sectors it is interested in – payments, food delivery and classifieds – these are investment areas that need a lot of upfront investment. Prosus will continue to burn cash as it goes into these new investments.”

Prosus said the issuances consisted of US$1 billion 4.027percent notes due in 2050, US$500 million (R9.67billion) 1.593percent notes due in 2028, and US$500 million 2.031percent notes due in 2032, in each case to be issued under its global medium-term note programme.

“The current favourable market backdrop enabled Prosus to diversify its funding sources by establishing a position in the euro bond market, while at the same time extending the duration of the company’s financing curve to 30 years in the US dollar market,” it said.

The debt raise comes after the group lost the bid for eBay’s classifieds business to rival Adevinta, for US$9.2bn. Last year, Prosus also lost the bid for Just Eat to Takeaway.com.

“The offerings attracted strong investor demand, with US dollar notes more than seven times subscribed and the euro debut notes more than 11 times subscribed on the eight-year notes and 12 times subscribed on the 12-year notes, allowing pricing of the bonds at rates that reduce the company’s average funding cost, while at the same time extending the blended maturity profile of its outstanding notes to almost 12 years,” Prosus said.

The group expected that the financing would be ratings neutral for Prosus. The offerings were expected to close on Monday, August 3.

Peter Takaendesa, the head of equities at Mergence Investment Managers, said Prosus was partly taking advantage of the cheaper cost of funding, as interest rates were low at the moment.

Old Mutual Equities analyst Neelash Hansjee said Prosus was building the balance sheet fire-power.

“We can expect more merger and acquisition activity to continue. It is a good time to raise funding for growth assets at good prices.”

Francois du Plessis, the managing director of Vega Asset Management, said Prosus was beefing-up its war chest to capitalise on potential opportunities. Despite the e-commerce group losing big acquisitions recently, Du Plessis complimented the management team.

“Hats off to the Prosus directors for walking away when the price asked did not make economical sense any more,” he said, adding that Tencent, in which Prosus holds a 31percent stake, was also on the acquisition trail.

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