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E-commerce group Prosus sale of a 2 per cent stake in Tencent

Shares of Tencent Holdings Ltd. edged lower in Hong Kong after Prosus NV priced its placement of the Chinese internet giant’s stock at the top end of a marketed range, raising HK$114.2 billion (US$14.7 billion) in the world’s second-biggest block trade on record.

Prosus, the Dutch-listed international arm of Naspers that holds the Tencent stake, said on Wednesday that cash from the sale will “increase its financial flexibility to invest in growth” in an emerging-market internet empire that extends across Indian online payments, South American food delivery and Russian social media.

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The deal is the biggest block trade ever, according to data provider Refinitiv. Block trades are typically arranged directly between big institutional investors rather than on public stock exchanges.

Tencent's stock dropped 1.5% on Thursday in Hong Kong after the news. It has gained about 80% since Prosus was listed on the Amsterdam stock exchange in 2019.

While the decision has made Naspers the most valuable company in Africa, its market capitalization of about $109 billion lags well behind the value of the Tencent holding. The creation of Prosus was partly designed to narrow that discount, but the Amsterdam-based company too is dwarfed by the size of the stake in the WeChat creator.

Prosus has committed not to sell any further Tencent shares for at least the next three years, the company said. Naspers sold US$9.8 billion worth of Tencent stake in 2018, a year before spinning off the shareholding and most of its other businesses into what is now Prosus.

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“The market has already expected that every three years Naspers would want to trim down its holdings to take out the heavy gains from Tencent to invest somewhere else,” said Tse of VC Asset. “So this placement itself is not very surprising.”

The latest Tencent shares up for sale by Prosus are worth about the same as the enterprise value of Just Eat Takeaway.Citigroup, Goldman Sachs and Morgan Stanley have been appointed as joint book runners to manage the transaction.

Prosus is offering the shares at between HK$575 and HK$595, representing a 5.5 per cent to 8.7 per cent discount to Wednesday’s close of HK$629.50, said one person with direct knowledge of the deal.

Naspers has always been wary of a wholesale sell-off or parcelling out of the Tencent stake to shareholders because of the multibillion dollar tax bills that would ensue.

That perhaps explains the muted reaction in Tencent’s stock on Thursday. The 2018 stake sale by Naspers had contributed to a loss of more than 9 per cent in Tencent’s shares over two days, wiping out US$48 billion in market value.

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