Bad billionaires

A Putin-approved plan to sell Yandex’s Russian assets to a ‘consortium’ might collapse due to Western shareholders’ concerns about sanctions

A deal to sell Yandex’s remaining Russian assets to a “consortium of Russian billionaires” is in danger of collapse due to the risk of international sanctions, four sources with knowledge of the negotiations told journalists at Meduza and The Bell. In mid-May 2023, Vladimir Putin approved a plan to sell to VTB Bank and three oligarchs: Interros conglomerate owner Vladimir Potanin, steel company Severstal main shareholder Alexey Mordashov, and Lukoil founder Vagit Alekperov. But the Kremlin has apparently miscalculated the reservations of Yandex’s foreign shareholders, and the company might now need to return to the president for his approval of another plan.

It’s been nearly a month since Yandex’s board of directors made any announcements about its review of “compliance with sanctions restrictions” regarding the “billionaires’ consortium” offered to buy out the company’s Russian assets (which include Kinopoisk, Yandex GO, Yandex Maps, and more).

Months earlier, Yandex’s consultants invited a few dozen of Russia’s biggest businesspeople to submit bids on the company’s Russian assets, seeking to determine a price that would suit all three parties in the deal: the potential buyers, the seller (Yandex LLC’s holding company, Yandex N.V., whose main shareholder is the family trust of Yandex founder Arkady Volozh), and the Kremlin, which has imposed strict limits on foreigners trying to divest from Russia.

The bids Yandex received were all within the range of $7–8 billion — a “compromise price” by consensus. (Yandex’s capitalization once peaked at almost $30 billion, but it had fallen to $17 billion before Russia’s full-scale invasion of Ukraine.) The Russian authorities have since required foreigners selling their Russian assets to do so at a discount of at least 50 percent. The Kremlin has also imposed a new 10-percent tax on all such transactions.

Yandex’s board of directors apparently estimated that it could attract interest from enough non-sanctioned bidders that a sale under these terms would be possible. This was a miscalculation, as everyone in the “consortium” approved by Putin is, in fact, under some form of Western sanctions.

Vladimir Potanin landed on the U.S. Specially Designated Nationals and Blocked Persons List in December 2022 (after he initially entered into negotiations with Yandex); Alexey Mordashov is currently sanctioned in the European Union, United States, and Great Britain; Vagit Alekperov is sanctioned in the U.K., Canada, Australia, and New Zealand; and VTB Bank is sanctioned in the U.S. and the E.U.

Not a single foreign fund among Yandex’s minority shareholders (there are several here) has agreed to a deal with Russian businessmen under Western sanctions while the full-scale invasion of Ukraine continues. For these entities, it’s simpler to use their Yandex shares as tax write-offs, one insider source told Meduza and The Bell. Another source claims that the Putin administration expected “those greedy Yankees” (meaning, Yandex’s minority shareholders in the U.S.) to agree to any sale. In fact, these minority shareholders also insist that potential buyers must be able to demonstrate transparently the origins of any funds used to buy Yandex’s assets.

Nobody in the “consortium” meets these conditions entirely.

Vagit Alekperov (who has avoided sanctions in the United States and European Union, so far) is reportedly the only potential buyer who’s offered to pay for his share of the Yandex assets without installments and at a higher price, but selling to a single investor would grant him significant control over these businesses and deviate from the plan approved by Putin. In other words, moving in this direction would likely require another consultation with the Kremlin.

Given the troubles of selling, another possibility for Yandex’s assets appears to be outright nationalization. Just weeks ago, VTB Bank CEO Andrey Kostin suggested that “transferring the company to external management” might be preferable to any sale.

Spokespeople for Yandex told Meduza that the company’s review of “compliance with sanctions restrictions” by potential buyers is “ongoing.”

Story by Svetlana Reiter (Meduza), Valeria Pozychanyuk (The Bell), and Irina Malkova (The Bell)

English-language adaptation by Kevin Rothrock