Prosus NV and its parent Naspers Ltd. received approval from South African regulators to remove a cross-holding structure in a deal that will let Naspers continue a share buyback program.

The South African Reserve Bank gave the required approvals for a proposed transaction that will remove the complexity of the cross-holding structure, Naspers said in a statement on Tuesday.

The ultimate aim of eliminating the structure and buying back stock is to reduce the discount between Naspers’s and Prosus’ overall value and the value of the group’s 26% stake in Chinese Internet giant Tencent Holdings Ltd. Naspers was an early investor in Tencent and as the Chinese company’s value soared, investors have put a disproportionately high value on the stake versus the company that owns it.

That led to Naspers splitting off Prosus, which contains the Cape Town-based company’s tech holdings and the Tencent stake, in 2019. About a year ago, Prosus started to reduce its holdings in Tencent to fund the stock buyback. Prosus currently owns about 26% of Tencent.

The regulator’s permissions will allow Prosus to be diluted out of its shareholding of Naspers, while Naspers will retain control over Prosus and a 43% direct economic interest in the company, Prosus Chief Executive Officer Bob van Dijk said in an interview. The cross holding between the two businesses was introduced in 2021 and resulted in Prosus holding 49.95% of its parent company.

“The open-ended buyback created about $30 billion in value,” to date, Van Dijk said in an interview. “However, we were going to run into limitations, and by removing the cross holding we will be able to continue with the program.”

Tencent shares rose more than 3% on the news that the cross-holding will be removed. Prosus shares opened 7% higher in Amsterdam, while Naspers was up 9% in Johannesburg.

“Naspers would have been stuck at max 10% share buyback without this proposed transaction,” said Peter Takaendesa, head of equities at Mergence Investment Managers. “We will have to see if there is nothing in the proposal that will stop shareholders from supporting the transaction.”

Van Dijk said there will be a vote on the transaction later in the year.

--With assistance from Thyagaraju Adinarayan.