"Yandex, the tech company often referred to as Russia's Google, has agreed to sell its Russian assets to a group of local investors for $5.2 billion, the largest corporate exit from the country since events in Ukraine almost two years ago.
The company, which is listed on Nasdaq and based in the Netherlands, said Monday it was selling about 95% of its assets, including its search engine, the biggest in Russia.
It will retain some of its assets outside of Russia, including autonomous-driving, cloud-computing and artificial-intelligence businesses, and plans to rebrand under a new name.
The deal is a potent marker of Russia's increasing isolation from the West, and the different status of its once globally expanding tech sector.
Yandex had built a presence in Europe, the Middle East and the U.S., where its suitcase-size rovers delivered pizzas on college campuses.
Monday's announcement caps months of uncertainty for Yandex, which has been looking at options to restructure its ownership and governance for more than a year. While trading in Yandex's Nasdaq-listed shares has been suspended since the events in Ukraine, its stock has plummeted in Moscow. The company's market capitalization stands at about $10 billion today, down from a peak of around $30 billion before the conflict.
The group buying the Yandex assets is led by local management and includes a fund linked to Russian oil giant Lukoil, as well as several entrepreneurs. Lukoil said in a statement Monday that it would hold 10% of the new Russian company. Apart from the search engine, Yandex's Russian assets include a popular ride-hailing application, an e-commerce platform and an Alexa-style virtual assistant called Alice.
Yandex's divorce mirrors the wholesale reorientation of the Russian economy away from the West, which has left the country, once a hot spot for Western investors, looking increasingly inward.
Russia and Europe have severed most of their oil-and-gas links, which once powered European homes and factories. Western brands from McDonald's to Renault have left the country. Russia, meanwhile, has increasingly pivoted to Asia, increasing its trade with China and India.
The Kremlin welcomed news of the Yandex sale Monday, with spokesman Dmitry Peskov describing the tech company as one of Russia's national champions and saying it was important that it remains in the country. Anton Gorelkin, deputy head of the State Duma committee on information policy, said that Yandex could now continue to operate without any Western influence.
"The successful case of Yandex will be an example for everyone else: It's time to stop working with an eye to the West, your future is here, in your homeland," Gorelkin wrote in a post on Telegram.
John Boynton, chairman of Yandex's parent company, said the business had faced "exceptional challenges" since the start of the conflict and that the sale was the best possible solution for shareholders.
The deal would allow shareholders to "recover some value" from the company's Russian assets while unlocking new growth potential for its international businesses, he said.
Since the start of the conflict in Ukraine, the Kremlin has taken steps to make it difficult for Western companies to exit from the Russian market, including a lengthy approval process, currency controls and exit taxes. The Kremlin has said there would be no "free exit" for foreign companies.
The Yandex sale price reflects a mandatory discount of at least 50%, which Russia requires from exiting companies registered in countries that Moscow considers unfriendly, including the Netherlands.
The sale took around a year and a half to negotiate with the Kremlin because of complexities of ownership and Yandex's sprawling global presence. One challenge was finding buyers who aren't subject to sanctions, and who are acceptable to the board and international regulators.
Yandex came under pressure after the outbreak of the conflict, and founder Arkady Volozh was hit by European Union sanctions in June 2022.
Volozh, who lives in Israel, has challenged the sanctions in European courts." [1]
The world of technology is splitting into two: the East against the West. We will have to live with the consequences of this for long time. Yandex is now becoming more reliable for Russia and will be able to participate more widely in the development of the Russian defense industry.
1. Yandex Owner Leaves Russia. Kantchev, Georgi. Wall Street Journal, Eastern edition; New York, N.Y.. 06 Feb 2024: B.4.
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