A South African company just created Europe’s biggest consumer tech group

Europe has a new tech giant.

Naspers, the South African company that hit the jackpot with an early investment in Tencent, is spinning out its 31% stake in the Chinese internet group via the listing of a new company on Amsterdam’s stock exchange.

Called Prosus, the company will have a market value of at least €95 billion ($105 billion) when it lists on Wednesday, making it the largest consumer tech company in Europe. It’s also the second largest tech company in the region after SAP in Germany. On Amsterdam’s Euronext exchange, only Royal Dutch Shell and Unilever are worth more.

Why list in Amsterdam?

Naspers paid just $32 million back in 2001 for its stake in Tencent. That investment is now worth €118 billion ($130 billion). It’s a return rivaled only by SoftBank’s $20 million punt on Alibaba in 2000, which secured the Japanese company a stake that’s worth $132 billion.

But the windfall gains have created a headache for Naspers. It now accounts for 25% of the combined value of the 40 biggest companies on the Johannesburg Stock Exchange — up from 5% just five years ago. That’s forced investors to sell Naspers’ shares so they’re not overly exposed to a single stock. As a result, Naspers trades at a discount of about 30%-35% of the value of its assets, said Jean Pierre Verster, founder and CEO of Protea Capital Management.

That’s where the move to Amsterdam should help. Following the Prosus listing, Naspers’ weighting in Johannesburg’s top 40 should fall to around 18%-19%, said Verster.

Prosus will also give funds restricted to investing in European-listed companies the opportunity to get exposure to China’s internet sector for the first time, Verster added.

Tencent, which owns the WeChat messaging platform and a host of payment apps and mobile games, is one of China’s largest technology groups. Naspers will continue to own at least 73% of Prosus, which also holds other technology assets such as stakes in restaurant app Delivery Hero, online classifieds business OLX Group and Russian internet company Mail.ru.

Naspers estimates that demand from passive investors for shares in Prosus could total as much as $3 billion, following the stock’s inclusion in a number of large global indexes. Investment from actively managed European, growth and technology funds is expected to top that, Naspers CEO Bob van Dijk said in a video posted ahead of the listing.

Will Naspers find another Tencent?

The deal also carries some risk for Naspers. It should become clearer to investors how its other bets are performing, which could determine whether the discount on the stock narrows further.

Even when Tencent is excluded, Naspers has delivered returns of more than 20% a year, considerably outperforming most equity markets, said Ruan Stander, a portfolio manager at Cape Town-based asset manager, Allan Gray. The firm owns 2.2% of Naspers.

Naspers has previously sold stakes in Indian e-commerce company Flipkart and Poland-based online marketplace Allegro Group at substantial profits.

It’s now going to focus on growing global businesses in online classifieds, food delivery, and payments and fintech, van Dijk said.

“The listing of their classifieds business under the OLX brand could be the next step,” said Charl Wolmarans, an analyst at Avior Capital Markets.