Russian investors are set to take over the country’s most valuable tech asset and major mining operations in deals worth around $9 billion. The transactions, which are up for shareholder approval on Thursday, come amid rising tensions and sanctions over Moscow’s invasion of Ukraine.
Yandex sells local subsidiaries at a discount
Yandex NV, the Dutch-registered company that owns Russia’s leading search engine and online services platform, agreed to sell its local subsidiary to a group of Russian investors for 475 billion roubles ($5.27 billion) in December. The deal, which values the subsidiary at a 50% discount to its market capitalization, was prompted by Kremlin pressure to limit foreign ownership of strategic digital assets.
The subsidiary, which operates under the Yandex brand, accounts for more than 90% of the group’s revenue and includes its core internet search and advertising business, as well as e-commerce, ride-hailing, and online education segments. It also holds a 45% stake in Yandex. Market, a joint venture with Sberbank, Russia’s largest bank.
The buyers include state-owned VTB Bank, which will become the largest shareholder with a 28.4% stake, as well as several private equity firms and wealthy individuals with ties to the government. Yandex NV will retain a 10% stake and a veto right over key decisions.
Shareholders of Yandex NV, which includes Fidelity, BlackRock, and Morgan Stanley, are expected to approve the deal, despite the significant loss of value. The alternative would be to face further regulatory hurdles and potential asset seizures, as other foreign-owned companies have experienced in recent years.
Polymetal offloads Russian assets amid sanctions risk
Polymetal International, a London-listed producer of gold and silver, is also seeking shareholder approval for its exit from Russia. The company agreed to sell its Russian assets, which represent about 80% of its output and reserves, to GV Gold, a Siberian miner, for about $3.7 billion in January.
The deal was driven by the threat of US and EU sanctions on Russia’s metals sector, following its military intervention in Ukraine. Polymetal, which has a dual listing in Moscow, said it faced a high risk of being cut off from international capital markets, suppliers, and customers if the sanctions were imposed.
Polymetal’s shareholders, which include an Omani state-owned consortium with a 29.9% stake, will receive shares in GV Gold as well as a special dividend. GV Gold, which is backed by US and Russian investors, will become one of the world’s top 10 gold miners by output.
Polymetal plans to focus on its remaining assets in Kazakhstan, where it has several growth projects. The company said it would continue to pay dividends and maintain its London listing, but did not rule out a possible relocation to another jurisdiction.
A challenging environment for foreign investors
The two deals illustrate the difficulties that foreign investors face in Russia, especially in sectors that are deemed strategic or sensitive by the authorities. The country’s business climate has deteriorated since the annexation of Crimea in 2014, which triggered a wave of sanctions and countersanctions, as well as a surge in nationalism and protectionism.
While some foreign companies have managed to adapt and thrive in Russia, others have decided to reduce their exposure or exit altogether. The trend has accelerated since the outbreak of the war in Ukraine, which has raised the stakes and the uncertainty for doing business in Russia.
However, some analysts and investors see opportunities in the current situation, as Russian assets are trading at low valuations and offer high returns. They argue that the risks are manageable and overstated and that the fundamentals of the Russian economy and consumer market are still attractive.
Source: ReutersÂ
