Yandex, referred to as Russia’s Google, has decided to sell its Russian business to a local investor group. The deal worth 5.2 billion is the largest corporate exit from Russia since the invasion of Ukraine started two years ago.
Yandex is listed on Nasdaq and has its headquarters in the Netherlands. It is selling about 95% of its assets. Its search engine is the largest in Russia. Some assets the company will retain outside Russia, like autonomous driving, AI, and cloud computing. It is also planning to rebrand under a new name.
Russia seems to be getting more isolated from the West, and this deal seems to confirm this. Its globally recognized and growing tech sector is now diminished in status. The company had its presence in the US, Middle East, and Europe, where suitcase-sized rovers delivered pizzas to college campuses.
Yandex was looking to restructure its ownership and governance due to the uncertainty its business faced for more than a year. On Nasdaq, the trading of its shares has been suspended, with its stock plummeting in Moscow due to the war. Its market cap is now $10 billion USD, up from $30 billion USD before the war.
The local management group, a fund linked to Russian oil Lukoil, as well as many entrepreneurs, were part of the group that bought out the company. Lukoil said it would hold 10% of the company. The Russian assets of Yandex include an e-commerce platform, a voice assistant named Alice, and a ride-hailing application.
Russia is trying to reorient the economy to lessen its dependence on the West. The Yandex deal should be looked at in this paradigm. Russia was once Europe’s dream investment, but now the country is looking inward.
Russia and Europe have cut ties on the oil and gas trade, which powered Europe’s commerce, industry, and households. Renault, Disney, and other Western brands have exited Russia. Russia is now trading more with India and China.
The Kremlin is happy about Yandex, which is a domestic champion, and they want it to stay in the country without Western influence.
It seems that the challenges of war have created an imperative solution for shareholders. Also, it would allow some respite for shareholders and new growth in its international business.
The Kremlin has made it difficult for Western businesses to exit Russia with exit taxes, lengthy approvals, and currency controls. The sale price is a 50% discount put mandatorily as a condition to exit for countries presently unfriendly to Russia, including the Netherlands.
It took a year and a half for the sale to take place because of complex ownership and Yandex’s global presence. Finding buyers not subject to sanctions and acceptable to the board and international regulators was a challenge.
Yandex came under fire from European Union sanctions because of the war and alleged support for Russia’s propaganda in June 2022.
Arkady Volozh, the founder of Yandex, challenged the sanctions and condemned the war in Ukraine. He lives in Israel.
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