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Naspers raises nearly R15bn in internet acquisition plan

Cape Town - Naspers has 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 $1.2bn (R14.83bn) 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 29 basis points to 5.21% since it was sold last week. That compares with an average of 7.35% 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 US Treasuries narrowed to 278 basis points, from 310 at issue.

Naspers, under the leadership of billionaire chair Koos Bekker, is scouring the globe for new internet acquisitions that will capitalise on the switch by consumers to smart devices for shopping, banking and other services.

Acquisition strategy

The company, which owns a 34% stake in Chinese Internet operator Tencent Holdings worth about $64bn, 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.

Naspers, which also owns about 29% of Moscow-based Mail.Ru Group, has increased annual development spending by 33% to R10.7bn ($859m) as it expands in online retail and targets new markets such as India, Nigeria, Brazil and Turkey, CEO 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 US dramas such as Mad Men to almost eight million DSTV subscribers, the unit is dwarfed in value by its shareholding in Tencent. The stake, started with an initial $32m investment in 2001, accounts for almost all of Naspers' about $65bn market value.

Some of Naspers’ recent investments are long-term bets trying to compete with larger, international competitors. Flipkart, an Indian online retailer 19% owned by the South African company, is going head-to-head with Amazon.com, which is investing $2bn in the country.

Travel site Ibibo, also based in India, is competing with Google 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, 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."

* Fin24 is part of Media24, a subsidiary of Naspers.

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