"Yandex» November 25 announced plans to split the group's assets. Part of the businesses, including autonomous cars, cloud technologies, and others, will continue to operate in Russia, but their international parts will be spun off into independent companies managed by a company in the Netherlands, the statement said.
The details of the changes have not yet been announced. “All proposed changes will have to be approved by Yandex NV shareholders,” the company’s press service added.
The main part of Yandex NV's business, taking into account a number of foreign directions, can be separated into a separate group of companies that will retain the Yandex brand, the company said in a statement. "Dutch Yandex NV plans to eventually withdraw from the shareholders of this group of companies and change its name," the Yandex press service said. Such a scheme implies a decision of the board of directors "on preliminary intentions."
“The possibility of changing the corporate structure is also being considered, in which the management of the spun-off group of companies will be transferred to the management of Yandex,” the company announced. The changes will allow it to continue to focus on building technology products and services.
"Yandex will continue to develop as a private independent group of companies, operate on the open market and compete with local and global players," the company's press service assured.
The intention of the shareholders of the Internet company to divide Yandex was reported by The Bell. According to the publication, the final configuration of the asset swap and management structure was discussed in November with Russian President Vladimir Putin. According to the publication, the head of the Accounts Chamber of the Russian Federation, Alexei Kudrin, played a key role in this structuring and approval of the transaction. For help in this division, the founder and key beneficiary of Yandex, Arkady Volozh, promised Kudrin 5% in the company, Forbes wrote.
“As a result, Kudrin himself will receive a stake in Yandex and head the structure that will make key decisions in the company with the participation of the current management. The Yandex shareholders may also include the structures of Vladimir Potanin and other Russian investors,” The Bell reported. It was noted that Volozh could lose control in the company, and in exchange get the opportunity to develop a number of its businesses abroad.
What does Yandex's structure look like now?
As of September 30, 2022, the Volozh family fund controlled 45.1% of voting shares and 8.5% of ordinary shares, according to the Yandex website. Another 46.3% of the voting shares and 87.6% of the company's share capital were in free float. Employees of the company, including top management, held 6.6% of voting shares and 3.2% of ordinary shares. “In total, the Volozh trust and other employees of the company have more than 50% of the votes. At the same time, almost 88% of the economic rights to the company are held by the holders of class A traded shares, which are accounted for in free float,” says Artem Mikhaylin, an analyst at Veles Capital.
In 2019, against the backdrop of a draft law on limiting foreign ownership in significant Internet companies being discussed in the State Duma, Yandex changed its management structure. The Public Interest Fund was created, to which the so-called “golden share” was transferred, with the help of which it can block transactions for the consolidation in one hand of 10% or more of the voting or economic shares of an Internet company. A bill to limit foreign ownership in such companies was never passed.
Yandex's revenue under IFRS in 2021 grew by 54% to 356.2 billion rubles, for 9 months of 2022 it amounted to 356.9 billion rubles, exceeding the total annual revenue for the entire previous year. EBITDA for 9M 2022 was RUB 46 billion, net profit was RUB 40.56 billion.
Why should Yandex share?
According to experts and analysts interviewed by Vedomosti, the division of assets will help Yandex cope with a number of problems immediately.
“The deal will solve problems with the development of new Yandex technologies abroad and their sale on world markets, and the Russian part of the business will be able to work in Russia, observing Russian laws,” said Alexander Volchkov, a consultant on financing and structuring transactions.
Of all the foreign assets of Yandex, the most active division is now the taxi segment, as well as food delivery units, analysts interviewed by Vedomosti say. These divisions are developing in the CIS countries, as well as in the Middle East region and Latin America, notes Buivolov.
According to Mikhailin, the Yandex taxi service now operates in at least 17 countries. “Relatively small volumes also have search, cloud and geoservices. Yandex.Lavka remained in Israel, and the project in Paris and London had to be curtailed,” he notes.
As for the division for the development of unmanned vehicles, this segment has "excellent long-term opportunities for generating revenue," but at the moment it is not worth expecting a significant contribution to revenue from it, Buivolov believes.
“Testing of unmanned vehicles in the United States has also been curtailed, but some projects may continue to work in Israel. Autonomous transport generates almost no revenue, at best, several tens of millions of rubles. for the quarter. Expenses now amount to 1.5-2 billion rubles. per quarter at the level of EBITDA,” Mikhailin concluded.
Pressing - 2022
Like any other large Russian company, in 2022 Yandex was under the pressure of sanctions and geopolitics. “The company’s capitalization has been actively declining since the second half of 2021, along with the entire Russian market, and has gone down sharply after the February events,” Mikhailin says.
According to him, after that there was a period of "gradual smooth recovery and again falling against the backdrop of the announcement of partial mobilization." Now the capitalization is recovering and is about 700 billion rubles, Mikhailin continued.
“Despite the partial recovery of quotes from the bottom, the current value of the shares is still at the level of 35% of the peak values,” Buivolov added. According to him, since trading in the company's shares abroad has been suspended since February, their price on the Moscow Exchange serves as a reference point for quotations. “At the peak of last year, the share price was around 6,000 rubles. per share, at the lowest levels of this year, the price was around 1,350 rubles,” Buivolov added. Now "Yandex" is "more than two times cheaper than a year ago," Mikhailin concluded.
Despite the fact that the group itself did not fall under the sanctions of any countries, its top managers were under the restrictions. In mid-March, Tigran Khudaverdyan, CEO of Yandex in Russia, fell under EU sanctions, after which he left his post. And in June, Volozh was also sanctioned. The company then announced that Volozh was leaving the posts of executive and general director in the parent company of the Yandex NV group in the Netherlands, and also transfers his voting rights to the board of directors.
Any urgent changes made to the charter and other documents of the company, in particular changes that directly affect the persons on the board of directors, general directors, founders - that is, all those who are directly involved in decision-making, slow down the work of the company, draws the attention of the head of the legal boutique "Formula of Success" Anna Gretskaya. “In addition, these changes affect the conduct of negotiations, the conclusion of transactions, this causes damage to the corporation as a whole, since the shutdown of a link in any case affects the work of other links,” she adds.
In March, due to the suspension of trading in shares of Russian companies on foreign exchanges, trading in Yandex securities was also suspended. The company reported the risk of default due to the inability to pay all holders of bonds for $ 1.25 billion if they suddenly demand their redemption.
Subsequently, the government provided Yandex and other large companies with concessional loans of 130 billion rubles. to redeem obligations on foreign exchanges. The press service of "Yandex" then said that the company took a target loan directly from a commercial bank, which was sent to pay for Eurobonds, without beginning to name its size and conditions.
In mid-May, the Israeli edition of Calcalist reported on Volozh's plans to move the headquarters of Yandex to this country. It was noted that it was about "hundreds of programmers, engineers and technology specialists." It was also reported about plans to split the company into two parts: one will remain in Russia, and the second - international - will be in Israel. But the press service of "Yandex" then stated that the transfer of headquarters from Moscow or the relocation of teams are not planned, noted RBC.
Also in May, sources from Meduza (recognized as a foreign agent in the Russian Federation) reported that since February, out of 18,000 Yandex employees, 3,000-5,000 had gone abroad. According to the interlocutor of Vedomosti, who knows this from the company's employees, now about 30-40% of its employees work from abroad. “But I believe that most of them plan to return to the country in the medium term,” he notes.
According to an interlocutor in one of the Russian Internet companies, now about 3,000 employees work outside the Russian Federation, and the total number of Yandex employees is about 20,000 people. The representative of "Yandex" denies this information. "These figures are not true," he said, declining to provide figures on the ratio of the company's employees working in Russia and abroad.
In what areas is Yandex strong?
At the same time, against the backdrop of the departure of large Western platforms from Russia, Yandex has significantly strengthened its position in its main search and advertising market, analysts interviewed by Vedomosti say.
“The share of the holding in search queries increased by about 3 p.p. over the year. and almost reached 63%. Particularly strong share growth occurred in [платформе] iOS,” says Mikhailin. For the search engine business following the results of 9 months of 2022. accounts for about 40% of revenue, draws the attention of Buffalo. “Although its share in revenue has decreased, it is the most important in terms of financing, as it has a high positive EBITDA, which the company can use to develop other areas, be it Yandex.Market, drones or other segments,” says the expert .
The growth in the advertising market occurred against the background of Google's restriction of access to its advertising inventory for Russian users. “Yandex has essentially become the only player in the search market for domestic advertisers,” Mikhailin concludes.
Yandex's positions are also strong in the taxi, food delivery and media services markets. “The exchange of assets with VK (“Yandex.News” and “Zen” - “Vedomosti”) and the receipt of the Delivery Club service in return makes the company an unattainable leader in the ready-made food delivery market. The departure of foreign streamers has strengthened the position of Kinopoisk,” Buivolov notes.
“Many segments have benefited significantly from the departure of Western competitors. The overall growth of the company's revenue in the second and third quarters by 45% and 46% year-on-year, respectively, clearly confirms this,” said Buivolov.