"Russia's Google" Yandex to exit in $5.2 billion deal, a historic corporate shift

Yandex NV, often referred to as "Russia's Google," has finalised a deal worth 475 billion roubles ($5.21 billion) to sell its major businesses to a consortium of Russian investors, as reported by Reuters.

This landmark deal represents the most significant corporate exit from Russia since Moscow's invasion of Ukraine almost two years ago.

The sale, orchestrated by the Kremlin, positions Russia's largest technology player entirely under local ownership, with key involvement from an investment fund linked to oil major Lukoil.

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A Tumultuous Journey: Yandex's complicated exit strategy

Yandex, listed on Nasdaq, was once seen as a potential global business from Russia.

However, co-founder Arkady Volozh's criticism of Russia's invasion of Ukraine in August 2023 sparked discussions of nationalising Yandex.

A fear of technology brain drain ultimately led to a complex deal, transferring over 95 per cent of Yandex's revenue-generating businesses to Russian control while retaining a few strategic assets.

Despite Yandex's efforts to portray itself as independent from Kremlin influence, the company has become a crucial national asset, necessitating the intricate negotiation process with the Russian government.

Market Capitalisation Plunge: A drastic shift from $30 billion to $10.2 billion

The deal values Yandex at $10.2 billion, a significant drop from its market capitalisation of around $30 billion in late 2021 before the geopolitical tensions escalated.

Yandex NV emphasised that the sale price reflects "a mandatory discount of at least 50 per cent to 'fair value,'" in line with Russia's regulations governing foreign asset sales.

The approval of such deals by the Russian government demands a minimum discount of 50 per cent.

Cash consideration and brand transition

The deal consists of a cash equivalent of at least 230 billion roubles and approximately 176 million Yandex NV Class A shares.

Notably, the cash consideration will be paid in Chinese Yuan (CNH) outside of Russia. Following the completion of the deal, Yandex NV will cease using the Yandex brand.

This marks a significant shift for a company that once held a prominent position in the Russian and global tech landscape.

Consortium.First: The buyer and the players involved

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, it received support from financial investors, including Argonaut, an investment fund ultimately owned by Lukoil.

The consortium also includes three other companies - Infinity Management, IT.Elaboration, and Meridian-Servis - owned by Alexander Chachava, Pavel Prass, and Alexander Ryazanov, respectively.

Importantly, no members of the consortium are under US, EU, British or Swiss sanctions, ruling out other potential Russian buyers.

Completion stages and Yandex's strategic retentions

Pending regulatory and shareholder approval, the sale is set to be completed in two stages, with the first expected to conclude in the first half of 2024.

Yandex NV plans to delist its Class A shares from Moscow Exchange once a new public listing is obtained.

The company will retain a portfolio of four early-stage tech businesses, a data centre in Finland, and the "core intellectual property asset" of 1,300 employees, emphasising a commitment to specific technological sectors.

Yandex NV's board chairman, John Boynton, described the deal as the best solution in "extraordinary circumstances" for shareholders and users.

Yandex's message to employees

In a letter to Yandex employees in Russia, company managers stressed that the main objective was to preserve Yandex's essence and independence.

Yandex NV assured its workforce that despite the changes, the company would remain an independent entity.

(With inputs from Reuters)