Two of the great trades of all time, for different reasons, are George Soros breaking the British pound and Naspers buying Tencent.
The Soros story netted his hedge fund about $1bn in September 1992. And while that is serious money, the trade was more about a hedge fund essentially forcing the Bank of England (BoE) to abandon the European exchange rate mechanism (pegging the pound to the euro). The BoE had raised rates twice in a day and spent billions defending the currency, but in the end Soros won.
The other giant trade is all about returns, and it’s the story of Naspers buying a 46.5% stake in Tencent for $32m, around R260m, in 2001. Back then, the Tencent messaging platform QQ had an impressive 1.5-million users. But it was all very early days, and while we knew the internet would matter, knowing how and why was still up in the air. And, of course, just a year earlier, the dot-com bubble had spectacularly burst.
That Tencent stake is a complex arrangement sitting within Prosus. It is now smaller at 22.8% but is valued at around $100bn. That is about 3,100 times the purchase price, and sales of Tencent shares have been funding both Naspers and Prosus operations and buybacks for ages.
I want to add a third trade to those two legends: Pick n Pay buying Boxer.
In 2002, a year after the Tencent deal, Pick n Pay bought Boxer for R185.8m. At the time, Boxer had a modest store count of 35 stores and sales of R800m. The stores were mostly rural and concentrated in KwaZulu-Natal, Mpumalanga and the Eastern Cape.
The strategy for Pick n Pay was about using the brand to expand into the lower-income and rural segment of the market. This is exactly what Boxer did and continues to do.
Boxer now has a market cap of about R40bn, making for a return of around 215 times. Impressive. But I think there is more to the story.
First, the CEO of Pick n Pay in 2002 was Sean Summers (reportedly Pick n Pay group enterprises MD Martin Rosen, together with Summers, negotiated the Boxer deal). Pick n Pay’s failings and problems are well known, but eventually management bit the bullet and started taking the group’s troubles seriously.
This involved bringing back Summers as CEO in 2023, as well as a rights issue. That capital raise in August 2024 brought in about R4bn for the group. It then listed Boxer in November 2024 and received R8.5bn from selling 34.4% of Boxer in the IPO process. A further 12.5% was sold by Pick n Pay in May this year via an accelerated book build. That raised another R4.7bn.
So, a chunky R4bn rights issue was substantially aided by more than R13bn in sales of Boxer shares. I would argue that without that extra R13bn, there is no way Pick n Pay would still be trading.
Yes, Boxer has been an excellent trade, but even more so in that it ultimately saved Pick n Pay — with Summers at the helm both times.
