Yandex NV has finalized a substantial 475-billion-rouble ($5.21 billion) deal to sell what is often referred to as “Russia’s Google” to a consortium of Russian investors, marking the largest corporate exit from the country since the Ukrainian conflict began almost two years ago.
Details of the Deal
Yandex NV, the Nasdaq-listed technology giant, has sealed a deal valued at 475 billion roubles ($5.21 billion) to sell its operations to a group of Russian investors. This move is orchestrated as a Kremlin-engineered initiative and is poised to make Russia’s largest technology player entirely Russian-owned. Notably, this includes a fund associated with the major oil company Lukoil.
This strategic move orchestrated by the Kremlin would result in Russia’s largest technology player coming fully under Russian ownership, including a fund ultimately linked to the major oil company Lukoil (LKOH.MM). This transaction solidifies Yandex’s departure from the realm of Western tech associations. Once considered a Russian company with the potential for global success, Yandex, listed on Nasdaq, had established itself as a leader in online services, encompassing search, advertising, and ride-hailing within Russia.
Motivations Behind the Exit
One of the driving forces behind this exit stems from the co-founder of Yandex, Arkady Volozh, who relocated from Russia to Israel in 2014. In August, Volozh publicly criticized Russia’s invasion of Ukraine as “barbaric,” prompting discussions within the Kremlin about the potential nationalization of Yandex. However, concerns over the risk of a technology brain drain played a crucial role in steering away from such a drastic move.
The co-founder of Yandex, Arkady Volozh, who had relocated from Russia to Israel in 2014, publicly criticized Russia’s invasion of Ukraine as “barbaric” in August. This led to internal discussions within the Kremlin about the potential nationalization of Yandex. However, concerns about a potential technology brain drain prompted a more nuanced approach. The resulting complex deal ensures that over 95% of Yandex’s revenue-generating businesses will remain in Russia under Russian control.
Negotiations between the Kremlin and Yandex have been ongoing for approximately 18 months, aiming to separate the Russian operations from Yandex NV, its Dutch parent company. Despite Yandex’s efforts to portray itself as independent from Kremlin influence, the company’s strategic importance has made this task increasingly challenging.
The Complex Deal
While the Kremlin has welcomed the deal, negotiations between Yandex and the Russian government have been ongoing for approximately 18 months. The objective has been to separate Yandex’s Russian operations from its Dutch parent company, Yandex NV. Despite Yandex’s efforts to maintain independence from Kremlin influence, the strategic importance of the company has made this process intricate and challenging.
The deal values Yandex’s market capitalization at $10.2 billion, based on a three-month weighted average of its shares on the Moscow Exchange. Notably, in late 2021, before Russia’s invasion of Ukraine, Yandex’s market value had approached $30 billion. The sale price includes a “mandatory discount of at least 50% to ‘fair value,'” as required by Russia’s government for deals involving foreign asset sales.
The buyer, Consortium.First, is a newly-formed investment fund managed by trustee Solid Management. Led by members of Yandex’s senior management team in Russia, the consortium includes financial investors such as Argonaut, ultimately owned by Lukoil. Yandex NV stated that no members of the consortium are subject to U.S., EU, British, or Swiss sanctions.
Pending regulatory and shareholder approvals, the sale is expected to be completed in two stages, with the first stage anticipated to close in the first half of 2024 and the second stage within seven weeks. Following the deal’s completion, Yandex NV plans to delist its Class A shares from the Moscow Exchange. The company will retain a portfolio of four early-stage tech businesses and key assets, emphasizing its commitment to remaining independent.
Conclusion
Pending regulatory and shareholder approvals, the completion of this deal is anticipated in two stages, with the first expected to close in the first half of 2024 and the second within seven weeks. Following the deal’s conclusion, Yandex NV plans to delist its Class A shares from the Moscow Exchange. Despite the significant changes, Yandex NV will retain a portfolio of early-stage tech businesses and key assets, emphasizing its commitment to certain aspects of its operations while undergoing this transformative exit from Russia.
