Russia's Lukoil to Acquire a Stake of About 10% in Yandex for US$ 5.8 billion

ACQUISITION - London. Nasdaq-listed technology company Yandex NV said it had struck a 475-billion-rouble ($5.21 billion) cash and share deal to sell all its assets in Russia to a consortium of Russian investors, including a fund ultimately owned by oil major Lukoil LKOH.MM.

The deal would see the country's largest technology player, often referred to as "Russia's Google", fall entirely under Russian ownership and cement Yandex's departure from the Western tech circles it once courted.

Yandex YNDX.O developed leading online services, including search, advertising, and ride-hailing, and was seen as one of the few Russian companies with the potential to become a global business until Moscow invaded Ukraine in February 2022.

The Kremlin has been engaged in negotiations with Yandex for around 18 months to try and spin-off Yandex's Russian businesses from Yandex NV, its Dutch parent company.

The deal is complicated for several reasons, primarily because Yandex, a strategically important asset for Russia was owned largely by Western investors. Yandex NV would secure one of the largest corporate exits from Russia since the war began, but Yandex businesses accounting for more than 95% of revenues would remain in Russia and fall under Russian control.

The sale price reflects "a mandatory discount of at least 50% to 'fair value'", Yandex NV said. Russia's government must approve deals involving foreign asset sales and demands a discount of at least 50%.

Yandex's market capitalization was calculated as $10.2 billion, based on a three-month weighted average for Yandex shares on the Moscow Exchange. In late 2021, before Russia's invasion, Yandex's market value had approached $30 billion.

Almost 88% of Yandex's ownership structure is currently free-float, with many Western funds among its shareholders.

Yandex NV said in a statement that the deal would consist of a cash equivalent of at least 230 billion roubles and up to around 176 million Yandex NV Class A shares.

"The cash consideration will be paid in Chinese Yuan (CNH) outside of Russia," Yandex NV said, adding that it would cease using the Yandex brand following completion of the deal.

'EXTRAORDINARY CIRCUMSTANCES'

The buyer, Consortium.First, is a newly-formed investment fund managed by trustee Solid Management. It was led by members of Yandex's senior management team in Russia and supported by four financial investors including Argonaut, an investment fund ultimately owned by Lukoil.

Three other companies - Infinity Management, IT. Elaboration and Meridian-Servis - owned by Alexander Chachava, Pavel Prass, and Alexander Ryazanov respectively, were also among the buyers.

Yandex NV made clear that no members of the consortium are under U.S., EU, British or Swiss sanctions. That requirement has ruled out other potential Russian buyers, sources have told Reuters.

The sale, once given regulatory and shareholder approval, is set to be completed in two stages, the first of which is anticipated to close in the first half of 2024, with the second stage following within seven weeks.

Yandex NV plans to delist its Class A shares from the Moscow Exchange, expected after Yandex has obtained a new public listing.

John Boynton, chairman of Yandex NV's board of directors, said the team had found the best possible solution for its shareholders and users in "extraordinary circumstances".

Yandex NV will retain a portfolio of four early-stage tech businesses in the cloud, data solutions, self-driving, and education technology sectors.

It will also keep a data center in Finland, as well as the "core intellectual property asset" of 1,300 employees, and transitional licenses through 2024.

In a letter to employees in Russia, Yandex managers said the main task had been to avoid destroying its essence, stressing that Yandex would remain independent.

($1 = 91.1500 roubles)