Yandex Exits Russia, Forced to Sell off Assets at 50 Percent Discount

At least half of the sale will be in cash paid in Chinese Yuan outside of Russia.

Photo taken on October 12, 2021 in Moscow shows Russia's internet search engine Yandex's logo on a laptop screen. (Photo by Kirill KUDRYAVTSEV / AFP) Photo by KIRILL KUDRYAVTSEV/AFP via Getty Images

Tech firm Yandex, popularly known as Russia’s Google, will leave the country after selling its assets for half the value, marking one of the biggest business exits from the nation since the start of the Russia-Ukraine conflict.

Yandex group, headquartered in Moscow, is owned by the holding company Yandex N.V. (YNV) registered in the Netherlands. YNV announced on Feb. 5 that all of Yandex group’s businesses in Russia and certain international markets will be sold to a purchase consortium for 475 billion rubles (approx. $5.25 billion). Founded in 1997 as Russia’s answer to Yahoo and Google, Yandex is the number one search engine in the country, with Google in second place. The company also owns food delivery, car-sharing, and shopping apps.

The sale value represents a 50 percent discount to the Yandex group’s market capitalization of around $10.2 billion at the end of January.

This is because Russian laws require that companies incorporated in nations deemed to be “unfriendly” to Moscow, like the Netherlands, provide a “mandatory discount of at least 50 percent” of the company’s actual value when selling assets to exit the country. Without the minimum discount, the government will not approve such deals.

If approved, the sale would be one of the biggest corporate exits from Russia since the country invaded Ukraine.

The businesses being sold represent over 95 percent of Yandex group’s consolidated revenues and around 95 percent of the group’s consolidated assets and employees.

At least 50 percent of the sale will be in cash and the remaining in shares. “The cash consideration will be paid in Chinese Yuan (CNH) outside of Russia.” YNV’s Board of Directors has approved the transaction. It now needs to be approved by the shareholders.

The purchase consortium buying Yandex group is composed of four companies and a fund. One company is formed and owned by the Yandex group’s Russian senior management team.

The other three companies are owned by Russian investors. The fund is owned by PJSC Lukoil, a Russian multinational energy corporation.

Once the sale is approved, Yandex will come under the control of Russian entities.

“This is exactly what we wanted to achieve a few years ago when Yandex was under threat of being taken over by Western IT giants,” said Anton Gorelkin, deputy head of the Russian parliament’s committee on information policy, according to Reuters. “Yandex is more than a company; it is an asset of the entire Russian society … Yandex has become a fully-fledged Russian IT company.”

Exiting Russia

YNV announced its decision to restructure Yandex group’s ownership structure back in November 2022 due to an “unprecedented and exceptional geopolitical environment.” The proposed deal “is the product of an extensive period of planning and negotiation over more than 18 months.”

Following Russia’s invasion of Ukraine in February 2022, foreign companies having operations in Russia have had a tough time exiting the country due to international sanctions and Moscow’s strict regulations, which force them to sell assets at unfavorable terms.

In addition to massive discounts, Russian authorities must also agree to the terms of sale and sign off on the buyers. Moscow has also seized assets of some foreign companies, like French yogurt maker Danone and Danish beer manufacturer Carlsberg.

Many foreign businesses face a tough time finding buyers who are not under Western sanctions. They also have to be careful to avoid any banned financial transactions. YNV clarified that none of the members in the purchase consortium is subject to sanctions in the United States, Switzerland, the EU, or the UK.

“Since February 2022, the Yandex group and our team have faced exceptional challenges. We believe that we have found the best possible solution for our shareholders, our teams, and our users in these extraordinary circumstances,” said John Boynton, Chairman of the Board of Directors of YNV.

“The proposed transaction will allow shareholders to recover some value for the businesses that we are divesting while unlocking new growth potential for the international businesses we will retain and enabling the divested businesses to operate under new ownership.”

The sales transaction will be implemented in two closings. In the first closing, approximately 68 percent of the stake in Yandex will be sold. This will be subject to required regulatory approvals. “We anticipate that the first closing will occur in the first half of 2024.” The second closing will sell off the remaining stake.

After the deal is completed, YNV will retain some of the international businesses and other non-Russian assets. This includes an AI cloud platform, a data solutions firm, a company involved in self-driving technologies, and an education technology service.

“These businesses are building an AI-focused suite of services and solutions initially to target markets in Europe, the US, Asia, and the Middle East,” the company said.

“Our core intellectual property asset following completion of the proposed transaction will be our talented team of approximately 1,300 people employed by YNV and the retained international businesses.”

Following the Russia-Ukraine war, some of the senior executives had publicly condemned the conflict. However, the company’s founder, Arkady Volozh, and its deputy chief executive at the time were sanctioned by the European Union, which blamed the firm for enabling Moscow’s war.

The EU accused Yandex’s news aggregation website of blocking antiwar content, which it said enabled the Kremlin’s propaganda efforts. The company claimed that it had no choice but to comply with censorship demands made by the Russian government.

Following the sanctions, the two execs were forced to step down to ensure that Yandex had access to financial services in the West.