Wildberries set for new Putin-approved shareholders

A very strange deal is in the works involving Russia’s largest online marketplace, Wildberries. The company, which sees around 2.5 trillion rubles’ ($27.5 billion) worth of business a year, is set to merge with the Russ group, Russia’s leader in outdoor advertising. The merger has Putin’s personal seal of approval. Curiously, the announcement of the deal seems to present Wildberries and Russ as equal partners, even though Wildberries is many times bigger than its new ally. Russ, however, seems to have some influential shareholders.

• Wildberries announced the merger with Russ in a low-key press release, published unusually late in the evening after 8:00 pm Moscow time. There is nothing in the release about the terms of the deal, nor what the shareholder breakdown of the new unified company will be. But Russia’s business media, citing sources close to the deal, reportedthat Wildberries founder Tatyana Bakalchuk will become the director general of the new outfit, while her Russ counterpart Robert Mirzoyan will be chief managing director — a structure typical of that used in transactions between equals.
• We also know we’re talking about an equal partnership because of a joint letter sent from Bakalchuk and Mirzoyan to President Vladimir Putin, which became public the day after the proposed merger was announced. The letter urges the president to support the deal and outlines the company’s incredibly ambitious plans, with a clear geopolitical angle. The pair want nothing less than to create “the largest digital banking network and payment system to make settlements in rubles around the world, bypassing SWIFT,” covering 5.8 billion people, the entire population of the “global south.” They said it would add 1.5 percentage points a year to Russia’s GDP growth and be a “serious rival to global companies like Amazon, Alphabet, Alibaba, and SoftBank.” Putin immediately forwarded the letter to the deputy head of the presidential administration Maxim Oreshkin with a clear instruction: “support.” 
• We can leave aside the obvious fantasy of building a global payment system in rubles and successfully overtaking the likes of both Jeff Bezos and Jack Ma. Nothing stops companies from chasing unrealistic dreams. But there is another big question: why does Wildberries need to team up with Russ to deliver it? After all, if it takes billboards to beat Bezos, they can be hired as needed without an elaborate merger and a joint plea to the president.
• In terms of size, Wildberries is at least 10-20 times bigger than Russ: in 2023, the marketplace’s revenues were 538.7 billion rubles ($2.7 billion), with net profit of 18.9 billion rubles ($200 billion), and turnover clearing 2.5 trillion rubles ($27.5 billion) — or more than 5% of of Russia’s total retail trade. Russ looks like a minnow in comparison, with revenue of 27.9 billion rubles ($300 million) and net profit of 4.9 billion rubles ($55 million).
• However, Russ does bring influential shareholders to the table. In the early 2000s, it was owned by Rupert Murdoch’s News Corp and was known as News Outdoor. But in 2008, Murdoch decided to get rid of his Russian businesses. “The more successful we are, the more likely it is that it will be stolen from us. Better to sell it now,” the billionaire said upon exiting. News Outdoor was purchased by a consortium of investors led by VTB Bank. In 2019, VTB sold the company to its current owners, represented by Mirzoyan. This wasn’t his only acquisition. From 2016-2023, Mirzoyan and his partners bought up four leading Russian companies in the outdoor advertising sector, and now enjoy almost a complete monopoly in the sector.
• Nobody in the market believes that Mirzoyan is an independent player. In 2019, RBC reported that the businessman was buying up assets for billionaire Suleyman Kerimov (12th on the Forbes Russia list of billionaires with an estimated fortune of $10.7 billion). At the same time, mysterious co-owners periodically emerged as the owners of a 30% stake in the holding company that manages Mirzoyan’s business. Up until 2019 it was Soviet footballer Guram Adzhoyev — who was in charge of the Ministry of Emergency Situations sports club in the 2000s, where the likes of Sergei Shoigu, Sergei Lavrov and other officials and businessmen worked out. Adzhoyev also worked in companies belonging to Putin’s friend Arkady Rotenberg and was one of the founders of the Night Hockey League in which Putin himself played. In 2019, Adzhoyev was replaced by Duma deputy Bekkhan Barakhoyev, another obvious figurehead representing the interests of an influential behind-the-scenes figure, and in 2022, the 30% stake went to a structure of Sergei Kotlyarenko, known as the manager of former deputy PM Igor Shuvalov’s personal assets.

Why the world should care

There are many dimensions to the redistribution of assets that has been triggered by Russia’s war on Ukraine and the ensuing Western sanctions. On the one hand, some businessmen close to the authorities are acquiring assets of foreign companies for kopeks. On the other, the state is confiscating assets from some who became rich in the 1990s in order to reward a new generation for its loyalty. But something else is at play as well. Business figures whose main assets are their connections and ability to resolve issues with officials are being given even more opportunities to take over “new” businesses that are either being created or forced into mergers. In the case of Wildberries, Russia’s largest marketplace, this is what appears to be taking place.