July 15, 2019, 10:16 am / Updated July 15, 2019, 11:19 am / Business

Yandex.Taxi will buy the assets of the Vezet group of companies

The deal will be closed by the end of the year Natalya Ishchenko Ksenia Boletskaya Alina Didkovskaya Angelina Krechetova Ekaterina Bryzgalova Andrey Gordeev / Vedomosti

The Yandex.Taxi service announced that it has agreed to purchase software and call centers of the Vezet group. A representative of Vezet confirmed this.

RBC previously named the main legal entities of Vezet Group as Fasten Rus LLC and Stolitsa DS LLC. The beneficiary of both legal entities is the Cypriot Fasten Cy Limited. According to the Cyprus registry, UFG structures have a total of 33.81% in the Cyprus company, it is the largest shareholder.

In the taxi market, technology and access to capital play a key role, says UFG Private Equity partner Arthur Akopyan: “Yandex,” from my point of view, is a great company, and this is the scenario [the deal between Vezet Group and Yandex.Taxi] We, as a financial investor, are satisfied.”

Vezet has been looking for investment in recent years. In 2018, Bloomberg, citing sources, reported on Vezet’s plans to raise $200 million for development. Interfax, citing an interlocutor familiar with the company’s plans, reported that investments were previously discussed with SoftBank, Rakuten, Kingdom Holding and Daimler. RBC reported on negotiations with Mail.ru Group (MRG), as well as with automakers ( AvtoVAZ and Renault-Nissan) and VimpelCom. Shareholders of Vezet were aimed at exiting the asset, says a Vedomosti source close to them.

Can a competitor block the deal?

A year ago, MRG announced an investment in Vezet: it issued it a convertible loan. The parties did not disclose its parameters. Kommersant, citing a source, wrote that the loan was about $20 million. A person familiar with Vezet shareholders told Vedomosti that the amount was “noticeably lower.” MRG is a co-owner of another large taxi service, Citymobil. According to the Unified State Register of Legal Entities, MRG owns 22% of Citymobil, another 12% belongs to the structure of Megafon, which is associated with MRG by a common shareholder, Alisher Usmanov.

After Yandex announced a deal with Vezet assets, a representative of MRG said: “We consider the released announcement to be premature.” According to him, according to the loan agreement, MRG has the right to veto the alienation of key assets of Vezet. “The parties to the new agreement should have received written consent from MRG,” says the latter’s representative. According to him, she did not give such consent.

The right to convert debt into shares of Vezet and MRG’s veto right to sell the assets of this company expire at the end of July, a source close to MRG shareholders told Vedomosti. The debt repayment period is longer, he says, but does not disclose details. At the same time, Vezet does not have the opportunity to unilaterally repay the debt ahead of schedule in order to cancel the right of veto, Vedomosti’s interlocutor insists.

A representative of Vezet assures that the group is not violating the terms of the loan with the upcoming transaction. The loan, according to the interlocutor, will be returned to MRG on mutually beneficial terms. The Yandex representative did not comment on questions about the relationship between the asset he was purchasing and MRG.

MRG lent money to Vezet to ensure it could get a stake in the company, explains a source close to MRG shareholders. But in the end, the group considered the asset to be overvalued. Vedomosti's interlocutor, close to Vezet shareholders, suggests that MRG had limited resources in the face of many investment projects.

What will Yandex receive ?

Vezet calls itself one of the largest taxi order aggregators; it operates in more than 100 cities in Russia, Kazakhstan and the Czech Republic. The group was created in 2017 after the merger of the Fasten Russia (Saturn and RedTaxi brands) and Vezet (RuTaxi, Leader, Vezet) services.

After the transaction, Vezet shareholders will receive up to 3.6% of Yandex.Taxi shares and up to $71.5 million “subject to the successful achievement of key goals for operational and other indicators,” the companies said in a joint statement. After completion of the transaction, 56.2% of Yandex.Taxi will belong to Yandex, 35.0% to Uber, and 5.3% to employees as part of the incentive program. The deal is expected to be closed by the end of 2019, but will require approval from the Federal Antimonopoly Service.

Analysts at VTB Capital note that, according to rough estimates, a 3.6% stake in Yandex.Taxi could be worth about $116 million. “Combined with $71.5 million in cash paid out, this does not imply a high price for potential growth market shares and synergies,” they assess.

The deal involves the sale of software and call centers, since the perimeter does not include all of Vezet’s assets, explained a source close to the shareholders of this group. For example, Yandex has clearly indicated its interest in the Russian business of Vezet, so the deal does not include the company’s business in other countries. Also, according to him, the deal will not include the cargo transportation service “Bringing Good.”

The Russian Government Analytical Center estimated Vezet’s share in the country’s market at 12.3% as of mid-2017, recall VTB Capital analysts. Since then, in their opinion, the share of this service has decreased and is unlikely to now exceed 10%. They estimate the share of Yandex in the Russian market at 25% at the end of 2018. Taking into account the fact that even without transactions, the market share of Yandex.Taxi is growing this year, the combined Yandex.Taxi and Vezet may have about 40% of the taxi market in Russia, analysts estimate. Citymobil has only recently started operating in the regions, but in Moscow its share, according to the Moscow Department of Transport at the end of 2018, is 24.5%.

A Yandex.Taxi representative said that he does not plan to change tariffs in connection with the deal with the Vezet group.