Yandex, known as “Russia’s Google”, has struck a deal to sell its Russian businesses to a consortium of investors led by state-owned bank Sberbank for $5.2 billion. This represents a massive 52% discount compared to Yandex’s market valuation of over $10 billion prior to Russia’s invasion of Ukraine.
Founded in 1997, Yandex was a pioneer in Russian internet search and online services. Over the years, it expanded into areas like ride-hailing, food delivery, and other e-commerce operations.
As Russia faced growing isolation following its invasion of Ukraine in 2022, Yandex came under pressure from the Kremlin to bring its operations under tighter state control. However, the company’s founders and main shareholders have resisted a full takeover.
With Western sanctions battering Russia’s economy and access to technology, Yandex has struggled to keep some services running and retain talent. This $5.2 billion deal allows the company to largely exit the difficult Russian market while keeping its international businesses intact.
Details of the Deal
The $5.2 billion transaction will see a new Russian company take over Yandex’s search engine, advertising, ride-hailing, food delivery and cloud units in Russia and neighbouring countries.
A new Dutch public interest foundation, created to protect Yandex’s interests in Russia, will hold priority shares ensuring the company’s technology remains free from government control after the sale.
The consortium of buyers is led by Russia’s largest bank Sberbank and includes the National Media Group fund, which operates under Gazprombank. The investors will have to secure Russian regulatory approval for the deal.
Overall, Yandex is taking a significant financial hit as it cuts ties with Russia. Its market cap has plunged from over $18 billion to around $6 billion since Russia invaded Ukraine. This $5.2 billion sale is at roughly half the estimated $10 billion+ valuation of Yandex’s Russian businesses in recent years.
|Consortium led by Sberbank, includes National Media Group/Gazprombank
|Estimated valuation of Russian ops
|Discount on sale
|Impact on Yandex market cap
|Plunged from $18 billion to $6 billion since Ukraine invasion
While representing a major corporate shift, the deal provides some clarity on the future of Yandex’s operations inside and outside Russia.
For Yandex internationally, the company will focus on developing its technology products and services beyond Russia after shedding the majority of its Russian assets. Its international units span Europe, North America, and Israel.
Inside Russia, Yandex will maintain a minority interest and some oversight on technology development through the new foundation’s priority shares. However, day-to-day operations will be fully Russian owned and the company expects to have no operational control or governance role.
The heavily discounted sale sidesteps a worse scenario feared by many – a full Kremlin takeover that could have put Yandex’s technology and vast data troves directly under state control. Still, critics argue buyers like Sberbank are far from independent and the deal ultimately cedes power and value from Yandex to entities linked to the Russian government.
For Russian internet users, the days of an independent homegrown alternative to Western Big Tech platforms appear to be over. Under its new ownership structure focused on serving domestic agendas, Yandex may start to more closely resemble a Russian national champion similar to state energy giants Gazprom and Rosneft.
In the near-term, many operational questions remain regarding the transition process given Yandex power’s position with over 50 services and products in Russia.
While Yandex will retain a board seat after the deal closes, its future role and influence in Russia remains unclear. The company has stressed its desire to protect the interests of its employees, who number around 20,000 inside Russia. However, a brain drain remains possible if some staff sees diminished opportunities under the new ownership.
Looking ahead, U.S. and European regulators will likely keep a close eye on whether Russian authorities use their leverage over the consortium of domestic buyers to gain deeper access into Yandex’s user data, algorithms and other sensitive intellectual property. Such a scenario could complicate relations with Yandex’s international businesses.
More broadly, this episode underscores Russia’s reversals after decades building up homegrown tech champions as alternatives to Western domination of areas like search, social media and e-commerce. The tech restrictions, sanctions pressure and isolation borne out of the Ukraine invasion have now forced Russia’s leading tech pioneer to relinquish control of its domestic empire.
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