In a big corporate maneuver, Yandex NV has sealed a monumental 475-billion-rouble ($5.21 billion) agreement to divest what is commonly referred to as "Russia's Google" to a consortium of Russian investors.
This historic transaction stands as the most significant corporate departure from the country since Moscow's incursion into Ukraine almost two years ago, signaling a transformative shift in the Russian tech landscape.
The intricacies of this Kremlin-engineered deal will result in Russia's leading technology giant undergoing a complete transition into Russian ownership.
This includes a fund ultimately owned by the major oil player Lukoil, solidifying Yandex's detachment from Western tech circles.
Notably, Yandex, once hailed as a potential global business, listed on Nasdaq, had garnered acclaim for its leading online services in Russia, spanning search, advertising, and ride-hailing.
Arkady Volozh, the co-founder of Yandex, who had relocated from Russia to Israel in 2014, slammed Russia's invasion of Ukraine as "barbaric" in August.
This vocal opposition prompted discussions within the Kremlin about the potential nationalization of Yandex. However, concerns over a potential technology brain drain urged a more nuanced approach.
The resulting deal, intricately and multifaceted, dictates that over 95% of Yandex's revenue-generating businesses will remain in Russia under Russian control.
The Kremlin, expressing approval for the transaction, engaged in negotiations with Yandex for an extended 18-month period to extract the Russian businesses from Yandex NV, its Dutch parent company.
Despite Yandex's persistent efforts to portray itself as free from Kremlin influence, the company's strategic national importance has made this task increasingly challenging, culminating in a deal of unprecedented proportions.
The deal values Yandex at $10.2 billion, calculated based on a three-month weighted average of its shares on the Moscow Exchange.
This stands in stark contrast to late 2021, when Yandex's market value had soared close to $30 billion before geopolitical dynamics were reshaped by Russia's invasion of Ukraine.
The sale price reflects a mandated discount of at least 50% to the perceived "fair value," a condition imposed by the Russian government for foreign asset sales, further underscoring the intricate nature of this landmark agreement.
Currently, almost 88% of Yandex's ownership structure is publicly traded, with numerous Western funds holding stakes.
The deal, comprising a cash equivalent of at least 230 billion roubles and up to approximately 176 million Yandex NV Class A shares, will be paid in Chinese Yuan (CNH) outside of Russia.
Post-deal completion, Yandex NV will cease using the Yandex brand, signifying a symbolic shift in its corporate identity.
The buyer, Consortium.First, emerges as a recently established investment fund managed by trustee Solid Management.
Led by members of Yandex's senior management team in Russia, the consortium receives backing from financial investors, including Argonaut, an investment fund ultimately owned by Lukoil.
Additional participants, namely Infinity Management, IT.Elaboration, and Meridian-Servis, owned by Alexander Chachava, Pavel Prass, and Alexander Ryazanov, respectively, further contribute to the diverse composition of the buying consortium.
Notably, all members of the consortium are confirmed to be free from U.S., EU, British, or Swiss sanctions, a critical requirement that ruled out other potential Russian buyers, adding another layer of complexity to the intricate deal.
Pending regulatory and shareholder approvals, the sale is anticipated to unfold in two stages, with the initial closing projected for the first half of 2024, followed by the second stage within seven weeks thereafter. Yandex NV plans to delist its Class A shares from the Moscow Exchange, a strategic move expected after securing a new public listing.
Despite the substantial structural changes, Yandex NV will retain a portfolio comprising four early-stage tech businesses in the cloud, data solutions, self-driving, and education technology sectors.
Additionally, the company will uphold a data center in Finland, along with the "core intellectual property asset" consisting of 1,300 employees and transitional licenses extending through 2024.
In a letter directed to employees in Russia, Yandex managers underscored their primary objective of preserving the company's essence amid these evolving circumstances.
They emphatically asserted that Yandex would remain independent, (which we know is nonsense). A claim met with skepticism given the complex nature of the deal and the intricate geopolitical backdrop surrounding it.
05.02.2024
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