Naspers and its Amsterdam-listed subsidiary Prosus this week released a record set of year-end results - but few in the market took much notice, with all the focus on the controversial swap deal that the group has proposed as it attempts, yet again, to reduce its dominance of the JSE and so improve the rating of its shares.And with a crowd of local fund managers launching fierce attacks on the convoluted deal, as well as on Naspers/Prosus management, the group raised a fresh defence this week, reiterating that if nothing is done the discounts at which the shares trade to their underlying value will grow even wider. Selling down or unbundling its stake in Chinese internet giant Tencent, as some shareholders want it to do instead, is simply "not doable".Cape Town-based Naspers would have to pay capital gains tax of $50bn (R707bn) if the group were to distribute its 29% stake in Tencent to shareholders, said Naspers/Prosus finance director Basil Sgourdos. And most of the shares would end up in the hands of Prosus shareholders who are not permitted by their mandates to hold emerging-market stocks - creating forced selling, which would undermine Tencent's value. "China is a massive internet market and Tencent is our China play. We give the opportunity to many shareholders who can't hold the share directly," Sgourdos said. Though Tencent still dwarfs the rest of the group, the results show the group making strong progress building its other consumer internet businesses. Naspers/Prosus's own e-commerce businesses benefited strongly as Covid drove consumers globally to shift online, posting revenue growth of 55% in the year to end-March. This was, for the first time, almost double Tencent's revenue growth. Food delivery grew particularly fast, but there was double-digit revenue growth too in the group's payments, classifieds and edtech segments. And in SA, Takealot is almost breaking even, on revenues that rose by 65%, with suggestions that this is a business the group could one day look to listing on the JSE.The group has spent $7bn over the past 16 months acquiring and expanding its e-commerce and consumer internet businesses and has a war chest of $10bn more to spend, Sgourdos said. Its e-commerce businesses have now been independently valued at $39bn.Prosus shareholders are due to vote on July 8 on the complex share swap deal, which would see Prosus acquire 45.4% of Naspers shares from Naspers shareholders through a voluntary exchange of Naspers for Prosus shares. That would reduce Naspers's weight in the JSE's benchmark Swix index from 23% to 13% and at the same time increase Prosus's free float on the Amsterdam exchange and jump it into the top 20 stocks on Europe's benchmark Stoxx index, attracting new international investors.However, even if Prosus's shareholders vote in favour of the deal, it still requires that Naspers's shareholders tender the required 45.4%. Naspers CEO Bob van Dijk and Sgourdos have been campaigning hard, reaching out to talk to hundreds of the group's 84,000 shareholders in an effort to counter pushback from South African fund managers. That includes a group of 36 leading fund managers - including the Public Investment Corporation - who this month wrote to the boards of Naspers and Prosus expressing concern that the share swap deal would increase complexity in the overall company structures, with cross-shareholdings that would defer the unlocking of potential value. They also expressed concerns about the structure of management incentives.Naspers accounts for as much as a quarter of the market capitalisation of the JSE, with the share having outperformed the rest of the market by miles, countering efforts by the group over the past five years to reduce Naspers's weight on the JSE, chief of which was the creation of Prosus two years ago to house the international assets, including Tencent. Despite these efforts, the Naspers share is now trading at an estimated 53% discount to its underlying net asset value - higher than before the Prosus listing. The Prosus share is trading at a 37% discount. And even though critics say size doesn't matter, and blame management's underperformance for the discount, Naspers/Prosus put the blame squarely with the shares' overweight position on the JSE, which has increased further over the past year as Covid boosted internet stocks but hit "SA Inc" stocks hard. Over the past five years, the JSE's total return has declined by 11% as Naspers's has increased by 16%, Sgourdos said - so a 27% differential. But the Naspers share does not get the benefit of its huge outperformance because, though it is a quarter of the JSE, most shareholders are limited to holding a maximum of 10% of their portfolios in a single share, so remain underweight, putting continual downward pressure on the share price. The share swap deal aims to counter some of that - and without it, said Sgourdos, the Naspers share will grow to 30% or 40% of the JSE over the next couple of years and the discount will keep widening. But the group recognises it needs to take more steps to unlock value. Sgourdos said management has engaged extensively with shareholders and has listened to their ideas. He also this week hailed the South African authorities for their role: "Government has been very fair and has gone a long way to accommodating us. The minister of finance, the Reserve Bank and the South African Revenue Service [Sars] have given us a framework. They acknowledge there is an issue which we need to fix and have worked with us to help, within certain requirements."He said the group had obtained a written tax ruling from Sars before proceeding with the proposed deal, which ensures that Naspers retains control of Prosus and that the group remains tax resident in SA, in line with the approvals the government granted when Naspers spun out Prosus and listed it in Amsterdam two years ago. Analysts have speculated that the group could end up with a large tax bill on the transactions, but Sgourdos said: "We have a written tax ruling from Sars that says this is correct and the cross-holding means the transaction creates no tax obligation. I have it in writing - we would not have taken a decision on something this big without that."The complex structure of the deal, which retains Naspers's 72% control of Prosus through a "B" share voting structure even though its actual economic interest will now be much lower, also enables the group to shift assets internally without incurring tax liabilities. Sgourdos said, however, that the transaction is not about tax structuring and the group's philosophy is that it has to pay tax in the countries in which it operates.Anchor Capital portfolio manager Michael Gresty said investors had never bargained for the value unlock coming with more complexity. The worry is that international investors' eyes will simply "glaze over" and they will not look at the shares. Nobody cares about the results, which are, however, really good, and if Naspers/Prosus can continue to demonstrate their ability to grow the "rump" of the group, maybe investors will start to say "this Prosus business is not just Tencent", he said. ..