FOCUS: Investor-appealing Yandex seen to win from independence from Sberbank

By Yekaterina Yezhova

MOSCOW, Jun 15 (PRIME) -- Yandex may announce a divorce with Sberbank in their joint ventures already in the middle of June in a move that would free the Internet company to develop fintech and e-commerce further and obtain new investors, analysts said.

“Yandex is Russia’s largest information and communications technologies company by market capitalization, while Sberbank is building the biggest IT ecosystem. The effort of the two IT behemoths to co-exist without disturbing each other, but to boost each other’s growth, was restricted, among others, by the prohibition for Yandex to develop fintech projects,” investment company Finam analyst Leonid Delitsyn told PRIME.

“It’s clear that such limits should be compensated by heavy benefits, which were hard to find. Sberbank’s interests are wide and the condition not to work where the bank or its partners do would have ended with a request for Yandex to confine itself to a search engine. But Yandex should escape it by all means, because its main weakness is in its significant dependence on contextual advertising. Yandex needs a partner that would help it to branch out into the spheres it has failed to do so far.”

Sales of online advertisements brought Yandex 30 billion rubles in January–March out of the total 47 billion ruble revenue, according to the company’s quarterly statement.

After media reports that Yandex and Sberbank are going to break their two joint ventures – e-commerce service Yandex.Market, comprising marketplace Beru, and fintech service Yandex.Money – and announce the move in mid-June, the Internet company and the country’s top lender said they were thinking about restructuring ownership in the joint businesses.

Media said Yandex would add Sberbank’s 45% in Yandex.Market to its 45%, while 10% of the firm will be still used for an employee incentive program. Yandex and Sberbank agreed in 2017 to develop Yandex.Market jointly, and the bank invested 30 billion rubles with the whole business estimated by the partners then at 60 billion rubles. The deal was closed in 2018, when the partners launched Beru. Sberbank CIB and UBS now value Yandex.Market at 90–96 billion rubles.

Researcher Data Insight rated Beru among the country’s top 10 Internet stores in 2019 with sales of 27.7 billion rubles. In January–March, Beru’s monthly turnover exceeded 4 billion rubles.

Sberbank owns 75% minus one share in Yandex.Money, acquired in 2013 for U.S. $60 million, and could now get the remaining stake from Yandex, which will be then free to develop fintech, a restriction imposed by Sberbank under the partnership.

Media said that having agreed on the two industries, e-commerce and fintech, Yandex and Sberbank saw their joint projects overlap or compete with their own. Sberbank was later rumored to intend to buy a big stake in Yandex, which pummeled the Internet company’s shares. Sberbank denied the plan.

Yandex was also said to sell up to 5% of Class A shares to investors, including Millhouse Capital, which manages tycoon Roman Abramovich’s assets, and financial giant VTB.

Investment company ITI Capital senior market analyst Stanislav Yudin doubts that Millhouse Capital or VTB would influence Yandex much if they enter its capital. “Yandex hardly lacks investor attention and can choose freely,” he said.

Investment company Aton said in a research note, “Yandex has previously talked about its desire to buy out part of Sberbank’s stake in (Yandex.Market) if the opportunity presented itself. Funds raised by the placement of 5% shares would be used for the Yandex.Market takeover, and investment would also be needed to further develop its ecosystem. Yandex hopes to use the COVID-19 pandemic as an opportunity for business expansion.”

Yudin at ITI Capital said the end of the agreement with Sberbank will be a beneficial long-term event for Yandex, which will get more flexibility in development of businesses.

“Yandex has a strong cash position of $2.5 billion as of March 31, and it is an attractive asset for investors and does not depend financially on Sberbank,” the analyst told PRIME.

“As to additional financing, it’s logical to presume that extra money would be needed if not for the acquisition of the Yandex.Market share than for development. A crisis is a time of opportunities, this is why anyone who can will raise money and make interesting mergers and acquisitions. The process will certainly benefit Yandex.

“Now, 89% of Yandex’s economic share and 44% of votes are Class A shares, which are the company’s free float, and 5% of Yandex shares amount to about $600 million in current prices. However, it is unclear whether the stake will go on market if the asset is paid with non-cash means,” Yudin said.

Delitsyn at Finam expects Yandex and Sberbank to split their joint ventures within six months, as they should move forward fast. “Yandex will be free from the restrictions imposed by the partnership and will be able to expand in fintech and other markets more aggressively,” the analyst said. 

(69.1219 rubles – U.S. $1)

End %%ee/jst%%