Yandex and Sberbank give up on ‘Russian Amazon’

Russia’s biggest internet company, Yandex, and the country’s largest bank, state-owned Sberbank, have ended their ‘Russian Amazon’ project. The Bell learnt this week that the JV created by the two companies in 2018 to dominate the local e-commerce market will be broken up. At the same time, Yandex will sell shares valued at $600 million to investors expected to include Russia’s second biggest state-owned bank, VTB, and billionaire Roman Abramovich.

• The details of a divorce agreement between the two companies were confirmed to The Bell by four sources close to the negotiations. Yandex will buy Sberbank’s 45 percent stake in their jointly-owned company Yandex.Market, while Sberbank will acquire 25 percent of Yandex’s payment system, Yandex.Money. The value of the deal has not been disclosed, but Yandex will almost certainly be the one to pay.
• Yandex and Sberbank inked their e-commerce JV in 2018, and Sberbank head German Gref said at the time that the project would become ‘Russia’s Amazon’. Just a year later, The Bell was one of the first media outlets to report (Rus) on tensions between the partners. It turned out that the two companies had several overlapping projects and were competing with each other. Sberbank was seeking broad integration with Yandex, and offered to buy a major stake in the internet company — but Yandex’s shareholders didn’t like this idea. Last year, Sberbank began seeking other e-commerce opportunities, and bought 20 percent of Russia’s second largest internet company, Mail.Ru Group. A major competitor of Yandex, Mail.Ru Group is developing taxi and food delivery services, and has an e-commerce JV with China’s Alibaba Group.
• At the same time as the Sberbank deal, Yandex is preparing an offering of up to 5% of its junior Class A shares (which trade on the NASDAQ). The terms of the offering have not yet been disclosed, but Abramovich’s investment vehicle, Millhouse, and VTB may both participate, according to sources who spoke to The Bell. Some of the funds raised may go to help finance the Sberbank deal. It may or may not be a coincidence, but after Yandex and Sberbank began to fall out, VTB drew closer to Yandex. VTB helped Yandex develop a new management structure that saved it from intense pressure from the government and, earlier this year, VTB Capital was named lead bookrunner for the Yandex.Taxi IPO in the U.S. alongside Morgan Stanley and Goldman Sachs.
• Yandex shares fell sharply at the beginning of 2020, but they have risen 45 percent since the end of March. The company is currently valued at $13.8 billion.

Why the world should care

Online shopping in Russia is booming, and there is a bitter struggle underway to seize market share. A parting of ways between Sberbank and Yandex has been on the cards for months, but the official divorce will mark a major shift in the e-commerce landscape.