Shares of Tencent Holdings dropped in Hong Kong after Naspers unit Prosus 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; R214-billion).

Tencent dropped 2.5% in pre-market trading. Amsterdam-listed Prosus priced the deal at HK$595/share, which represents a 5.5% discount to Tencent’s last close of HK$629.50, according to terms of the deal. The sell-down is the world’s second biggest block trade on record, after a $20.7-billion sale of American International Group shares in 2012.

The e-commerce group is selling a 2% stake in Tencent, reducing its holding to just under 29% while remaining the biggest shareholder of the Chinese firm, it said in a statement on Wednesday. It was marketing 191.89 million Tencent shares at HK$575 to HK$595 apiece.

The deal will more than quadruple Prosus’s cash reserves from $4.6-billion as of the end of September. It helps to boost Prosus’s coffers at a time when e-commerce is booming, with the coronavirus pandemic increasing online demand for everything from shopping and food delivery to education. Prosus already has assets in those sectors alongside the likes of payment services, and has long been on the hunt for further acquisitions.

“The group has some really interesting investments in India’s e-commerce space, so perhaps that is where some of the capital will go,” said Nick Kunze, a senior portfolio manager at Sanlam Private Wealth. “They now have the war chest to implement on the opportunities.”

Mega deal

The fundraising may also give Prosus another shot at securing a mega deal, having missed out on two high-profile takeovers over the last 18 months. The company lost an $8-billion battle to buy UK food group Just Eat to Takeaway.com at the start of last year, and in July was beaten in a $9-billion auction for eBay’s classifieds business by Norwegian rival Adevinta.

Prosus shares were down 4.6% at the close on Wednesday in Amsterdam. The company is cashing in on one of the all-time great venture capital deals. Naspers, the company’s Cape-Town-based parent, invested just $32-million in Tencent in 2001, when it was an obscure Internet firm. The shares are now worth about $239-billion.

While the decision has made Naspers the most valuable company in Africa, its market capitalisation of about $105-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.

In 2018, a surprise sale of stake by Naspers had contributed to a loss of more than 9% in Tencent’s shares over two days, wiping out $48-billion in market value.

Prosus has committed not to sell any further Tencent shares for at least the next three years, the company said. Naspers sold a similar size stake in 2018, a year before spinning off the shareholding and most of its other businesses into what is now Prosus. — Reproted by Swetha Gopinath and Julia Fioretti, (c) 2021 Bloomberg LP