FOCUS: Market eager for Yandex split news, decision yet to come

By Yekaterina Yezhova

MOSCOW, Jun 5 (PRIME) -- Yandex N.V.’s investors are eager to learn about the Dutch firm’s restructuring and divesting from the Russian business, whose control will stay with the management, while the remaining stake may be held by a consortium full of big names, analysts said.

“The investors welcomed the company’s confirmation of its intention to keep the controlling stake in the hands of the management, which means to maintain its current corporate governance and the economic strategy of development,” Freedom Finance Global analyst Vladimir Chernov told PRIME.

“The spin-off of the Russian business, which accumulates the bulk of the company’s income, lifts all external risks for the Russian investors.”

The ordinary shares of Yandex N.V. climbed 17.3% over a month and 29.1% since the beginning of the year closing at 2,345 rubles on the Moscow Exchange on June 2.

“The company’s quotes jumped by 9.3% on the initial news. The quotes gained 5.8% on the day when Yandex officially confirmed the receipt of the bids and the news about a possible choice for the current shareholders. The investors’ mood is positive,” Cifra Broker analyst Daniil Bolotskikh told PRIME.

Bloomberg on May 19 reported quoting sources that Yandex N.V. received bids from billionaires Vladimir Potanin and Vagit Alekperov for 51% in the company’s Russian assets, which they valued at 560 to 600 billion rubles taking into account a 50% discount imposed by the government for foreign firms leaving the country.

VTB Bank CEO Andrei Kostin on May 23 said that the bank as part of a consortium of investors is interested in acquiring a stake in Yandex. The lender’s Deputy Chairman Dmitry Pyanov on May 26 said the negotiations are still at a very early stage and the acquisition would be financed with the bank’s liabilities.

“VTB is already a minority shareholder of Yandex N.V. The shares would be most likely spread equally among the potential shareholders. This is an investment entirely based on economic interests,” Bolotskikh at Cifra Broker said.

Chernov at Freedom Finance Global thinks the most probable scenario comprises the sale of the local segment of the business to the investor consortium, while the management will retain 51% because the company is of strategic importance for the Russian market and cannot be owned by one investor.

The analyst added that the consortium, which cannot bid for more than 49%, may include VTB, Alekperov and Potanin.

“It will be a strategic long-term investment in the high-technological company that holds the leading position on the Russian market and has a high growth potential,” he told PRIME.

Chernov added that the investors will look at the size of the deal and the distribution of stakes between the new shareholders. Bolotskikh agreed that the investors will keep an eye on the company’s final valuation, and “in case of deviation from the fair price, the investors can gain from a high valuation and lose from a low one.”

Yandex N.V. first announced the restructuring in November 2022 and said it seeks to divest from its Russian business and change the name, while the local firm will keep the Yandex brand.

“Yandex’s key advantage in the business split will be in a change of the jurisdiction and elimination of various externals risks,” Chernov said.

Yandex N.V. said on May 25 that its board of directors confirmed the receipt of the proposals but no decision has been made yet. It also said that any transaction “will be done in strict compliance with all applicable sanctions requirements.”

The board said “it aims to enable the international divisions of some services – self-driving, cloud computing, data labeling and ed-tech – to develop independently from the Russia-based businesses.” The board intends to bring a restructuring proposal to the shareholders later in 2023.

A Yandex spokesperson on May 25 said that the businesses of self-driving cars, cloud computing technologies, educational services, and data labelling will continue to work in Russia. The international parts of these directions will be spun off into firms under Yandex N.V.’s control.

Bloomberg on May 25 also reported quoting sources that Yandex N.V.’s investors will have a choice to keep a stake in the Russian business, take cash or get a stake in international startups.

“I think that the Russian company will stay on the Moscow Exchange but as a new firm with other shareholders and jurisdiction since it needs additional investment to upgrade and develop its business,” Chernov said.

Bolotskikh reiterated that the Finance Ministry had supported the central bank’s initiative on a compulsory listing on a bourse of part of the shares purchased from the firms leaving the country.

(80.8756 rubles – U.S. $1)

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