The management and consultants of the Dutch Yandex NV are discussing several options for reorganizing the company as part of the process of spinning off Russian business into a separate legal entity and possibly attracting investors to its capital, a source familiar with the consultations told RBC and confirmed by an international investor aware of the preparation of reorganization scenarios.
How can Yandex’s business be divided?
One of the scenarios currently being discussed envisages that the division of the business could proceed as follows:
– The Dutch Yandex NV, whose shareholder is Arkady Volozh, will establish a Russian structure in which it will own a 100% stake. The option of registering it in a special administrative region of Kaliningrad is being considered, one of RBC’s sources says;
— the mechanism of the “golden share” owned by the Public Interest Fund (allows blocking major transactions with the company’s securities, agrees on intellectual property management issues, etc.) will be transferred to a new Russian company;
– within the framework of the new Russian structure, a fund of managers is being created, which can include ex-head of the Accounts Chamber Alexei Kudrin, who joined Yandex, Tigran Khudaverdyan, ex-general director of the company, Daniil Shuleiko (director of the e-commerce and logistics services business group) and Artem Savinovsky (CEO of Yandex);
– Yandex NV will transfer the management of Russian business to this fund for 5 years, including the right to vote with a controlling stake (but not the papers themselves, reflecting economic interest) and the right to appoint up to six representatives to the board of directors. Now the board of Yandex NV includes seven people, how many of them can be in the Russian structure, the interlocutor of RBC did not specify;
They demand money from the owner for the debts of the company. What is he entitled to?
– in turn, the Dutch Yandex NV will receive licenses for the development of four projects abroad: drones, cloud technologies, the educational Yandex.Practicum and the Toloka data markup project. The possibility of paying a sum of $300-400 million to the Dutch company is also being discussed.
Thus, the division of the Yandex business into Russian and international blocks can be carried out. A situation is possible in which Yandex NV shareholders who disagree with the terms of the reorganization could present the papers for redemption, does not exclude the source of RBC, but, according to him, such a scenario was not considered in detail.
Who owns the Dutch Yandex NV
The capital of Yandex NV is divided between the family trust of the founder of Yandex Arkady Volozh (8.5%) and the company’s employees (3.2%), the remaining 87.6% are in free circulation. At the same time, the main owners of voting shares are the Volozh family trust (45.1%) and members of the board of directors, managers and employees of the company (6.6%). Also, since 2019, there has been a Public Interest Fund, which received a “golden share” (allows you to block the consolidation of 10% or more economic or voting shares in one hand, coordinate the transfer of significant intellectual property, changes in the company’s regulations for the protection of non-anonymous big data of Russian users, possible partnerships with governments of other countries, temporarily suspend the head of Yandex in Russia).
How and to whom can they sell a stake in Russian Yandex
The next stage of the reorganization, according to this scenario, provides for the possibility of selling 51% of Russian Yandex to investors, while Yandex NV will retain 49%
“For the company, this is an opportunity to retain international investors, and for them, income from an increase in the value of the business,” explained a source familiar with the discussion of reorganization scenarios, noting that this may be relevant for sellers in terms of a possible discount when selling a stake.
According to one of RBC’s sources, the composition of investors has not yet been determined, but the company’s managers insist on attracting private businessmen and have formed a preliminary list of those with whom they would be ready to start negotiations on entering the capital of Russian Yandex.
The “broad” list of those who, in the opinion of management, could act as a potential investor, includes 20 businessmen. In particular, it included Suleiman Kerimov, senator, former main owner of the Polyus gold mining company, Vladimir Lisin, chairman of the board of directors of NLMK, Vyacheslav Kantor, co-owner of the mineral fertilizer producer Akron, Vagit Alekperov and Leonid Fedun, shareholders of LUKOIL, Viktor Vekselberg, businessman Sergey Popov, Vladimir Kogan’s family trust, founder of Magnit Sergey Galitsky, chairman of the board of directors of Kievskaya Ploshchad God Nisanov, co-owner of the mineral fertilizer producer PhosAgro Andrey Guryev, co-owner of Severstal, TUI AG, Power Machines , Nord Gold and Lenta Alexey Mordashov, co-owner of Evraz Alexander Abramov, founder of Wildberries Tatyana Bakalchuk, president of Interros and MMC Norilsk Nickel Vladimir Potanin, Novatek CEO Leonid Mikhelson, former co-owner of the Pipe Metallurgical Company and Sinara Dmitry Pumpyansky, the main owner of the Magnitogorsk Iron and Steel Works (MMK) Viktor Ra Shnikov, co-owner and president of the Mercury group of companies Igor Kesaev, as well as private investor Leonid Boguslavsky.
The Yandex representative declined to comment on both the reorganization scheme and the possible list of applicants for entry into the company’s capital.
“This option of a possible entry of investors into the capital of Russian Yandex is really being discussed, but it is very far from the final decision,” says a RBC source familiar with the discussion of reorganization scenarios. He called the list of potential investors of the company incomplete.
Another RBC source says that “many on this list will be surprised that they are even there.”
“There are two problems with a possible deal. First, private investors are not ready to pay a lot now because of the sanctions risk. State and quasi-state market participants are willing to pay a lot. And for investors, profitability is a priority. Secondly, the problem for the buyer is that 51% of the economic interest is being sold, and all decisions in the company within five years will be made by the fund of managers, ”the RBC source described the situation.
According to an investor familiar with the scenarios for the reorganization of Yandex, the possibility of selling 51% of its Russian subsidiary for about $4 billion is now being discussed, with an assessment of the entire business at $8 billion.
“It is proposed to focus on market valuations,” he says.
“According to our information, no proposals (to Vladimir Lisin) have been received,” an NLMK representative told RBC. “The information does not correspond to reality, even the possibility was not considered,” a representative of Uralsib told RBC (from 2015 until his death in 2019, it was owned by Vladimir Kogan, and now by his heirs). An Acron spokesman said that he “does not know anything about such an offer (to the company’s founder) Vyacheslav Kantor.” Leonid Fedun said that he had not received such an offer.
“There are various proposals for Yandex, but so far they are very superficial,” a source close to one of the businessmen listed on the list told RBC. RBC’s interlocutor, surrounded by another businessman, said that Yandex was gathering a consortium of buyers and “the list of applicants was clear plus or minus about a month ago, but the details are still being discussed.” According to him, “Potanin is interested in economic control, but management was afraid that through him he would be able to influence decision-making.” A source in Interros confirmed that such negotiations were underway, but did not give details, saying that there was nothing to comment on the results of the negotiations.
Representatives of Interros and Renova declined to comment. Representatives of Kesaev, Mordashov and Bakalchuk also acted. A RBC source close to Bakalchuk said that there were no negotiations with her, she does not know about the composition of the long list. RBC sent inquiries to Leonid Boguslavsky, Sergey Galitsky, Suleiman Kerimov, representatives of Rashnikov, Guryev, Lisin, Pumpyansky, Novatek and Kievskaya Ploshchad. It was not possible to contact Alekperov, Popov and Abramov or their representatives.
Are there alternatives
An alternative variant of the reorganization of “Yandex” does not provide for the sale of 51% of the Russian “daughter”, says the source of RBC. In this case, according to him, Yandex NV will transfer the rights to manage Russian business and vote shares to the fund of managers, and the Dutch company will receive licenses for the development of four projects abroad and a cash payment of up to $400 million.
The decision on the reorganization scheme should be made in the spring, and the process itself is expected to be completed by autumn, RBC’s interlocutor noted.
Another source close to Yandex told RBC that “there are more than two schemes, but some of them are no longer relevant,” without specifying the details. According to him, the final version of the reorganization may appear by May, and the deal will take place before the end of this year.
Why does Yandex need a reorganization
The issue of reorganizing Yandex has been discussed since the start of the special military operation. At the end of November, the company officially confirmed that the board of directors of Yandex NV began to study the possibility of changing the ownership and management structure of the company “in light of the current geopolitical situation.”
Among the scenarios considered was the creation of international divisions for several services, including drone and cloud technology, a data labeling platform, and educational services. It was assumed that Yandex NV would withdraw from the shareholders of other Yandex businesses, including search, advertising, e-commerce, logistics, food delivery, entertainment services, taxis, carsharing, etc., both in Russia and abroad, and that certain controls of the listed directions will be transferred to management. The latter will retain the right to use the Yandex brand, and Yandex NV will subsequently be renamed.
How analysts assess the prospects for the separation of “Yandex”
The head of the analytical department of Gazprombank, Anna Kupriyanova, noted that in the described scheme “there are still more questions than answers, and many blank spots.” According to her, the potential value of 51% of Yandex in Russia can be calculated based on 80-90% of the current market capitalization (based on the current value of Yandex NV on the Moscow Exchange, this is 518-583 billion rubles), you can also take into account the potential upside (expectation of growth of quotations) at the level of 20-40%. But she made a reservation that the deal is unlikely to be made at market value, but rather will involve a discount. “In the future, Yandex may grow due to the emergence of certainty in the event that the reorganization is completed,” says Kupriyanova. “Yandex remains the flagship of the Russian market in the field of online advertising, food delivery and taxis, as well as one of the leaders in e-commerce.”
Anna Kurbatova, an analyst at Alfa-Bank, believes that “as part of the reorganization deal, which will most likely involve a change in strategic owner, the conditional Yandex Russia company can be valued at multiples that are closer to historical values and higher than current market quotations.” Yandex. “In our opinion, the assessment of Yandex Russia may lie in the range of $ 13-16 billion for 100% (984-1211 billion rubles at the current exchange rate. – RBC). Upon completion of the reorganization, the value of assets may grow both due to the continued growth of the company’s business (given the strengthening of Yandex’s positions in many market segments after the departure of foreign competitors), and due to a further reduction in the discount to historical levels as shareholder risks are eliminated, ”says Kurbatov.