South African media group Naspers and Tradus — formerly QXL Ricardo — have reached agreement on the terms of a recommended cash offer to be made by Naspers’s subsidiary Myriad International Holdings BV for the entire share capital of Tradus at £18 a share, it was announced on Tuesday.
The total cash consideration of £946-million, excluding costs, payable by Naspers will be funded using a combination of existing resources and bridge funding of £700-million arranged by Citi for the purposes of the offer.
Following completion of the offer, the bridge funding will be refinanced by a combination of cash, debt and equity funding, Naspers said.
Tradus provides online consumer trading platforms and related internet services in 12 European countries that connect buyers and sellers.
The offer, which is to be implemented by way of a court-approved scheme of arrangement, values the existing and to be issued share capital of Tradus at approximately £946-million, or around R13,2-billion.
This represents a premium of 19% to the mid-market closing price of 1 510 pence per Tradus share on November 6 — the last business day prior to the announcement by Tradus that it had received a preliminary approach regarding a potential offer, and a premium of 37% to the average mid-market closing price of 1 317 pence per Tradus share for the period October 18 to November 6.
The directors of Tradus consider the terms of the offer to be fair and reasonable, and intend unanimously to recommend Tradus shareholders to vote in favour of the scheme, Naspers said.
Investing
Naspers said it began investing in the nascent internet segment as early as 1997. Since then, the internet has developed into one of the faster-growing areas of the media industry.
In its own strategy Naspers has prioritised the internet sector for expansion.
Success has been achieved in the sub-segments offering users communications, social networking and community platforms.
In pursuit of this strategy, Naspers today has various internet investments on the African continent through M-Web. In China the group has a roughly one-third interest in Tencent, which has established itself as a leader in its market.
In Russia, it has a broadly similar stake in Mail.ru, which is developing into a market leader and in India, an internet business focusing on the youth community.
With these investments the group has established a strong presence in the major emerging markets.
Central and eastern Europe have also been identified as attractive emerging markets and the group is presently finalising a controlling stake in Gadu Gadu, a young internet business there.
The proposed acquisition of Tradus will consolidate the group’s presence in Poland and provide a platform to extend its reach to the other Central and Eastern European markets.
Apart from the investment in Tencent and Kalahari (an African e-tailer), other Naspers platforms had not yet generated transaction income, the company said.
Its existing internet services relied on the generation of revenue mainly through advertising and value-added communication services. The intention was that an investment in the Tradus transaction platform would allow the group to diversify its internet revenue streams to include transaction income.
Naspers has received irrevocable undertakings to vote in favour of the scheme at the court meeting and the EGM from the directors of Tradus who hold Tradus shares and from shareholders Novator Equities and Wouwer Investeringen BV, representing, in aggregate, 17,9% of Tradus’s issued share capital.
Tradus’s most substantial market is Poland. Other Eastern European operations are in Bulgaria, the Czech Republic, Hungary, Romania, Russia, Slovakia and the Ukraine. Most are emerging markets with reasonable or high growth. In Western Europe Tradus has operations in the more mature markets of Denmark, Norway and Switzerland, but not all are well-established, Naspers said.
Tradus reported pro forma turnover for the financial year to end in March 2007 of £46-million — R643-million — generating a trading profit of £15-million — R210-million — and had net assets of £60-million — R839-million — at that date.
It is intended that, following the offer becoming effective and subject to applicable requirements of the London Stock Exchange and the UK Listing Authority, MIH will procure that Tradus will apply to the LSE and the UK Listing Authority for cancellations of Tradus’s listing.
The court meeting and EGM of Tradus shareholders is expected to be held in early February.
The offer is subject to a number of conditions precedent including, the obtaining of relevant regulatory approvals (in particular Polish competition authority clearance), approval by Tradus shareholders and the sanction of the scheme of arrangement by the court. ‒ I-Net Bridge