Yandex gets a new set of owners

The two-year saga surrounding the sale of Yandex’s Russian assets is nearing its end. Russia’s leading internet company announced Monday that it is dividing its business in two. Founder Arkady Volozh, who lives in Israel and has condemned Russia’s invasion of Ukraine, will keep hold of a small portion of the company’s promising international assets, while the main money-making parts of Yandex will stay in Russia, with new Russian owners. On Monday the company named who those new shareholders will be. Most are known only to industry specialists, but there is little doubt that they are just a front for the real beneficiaries of the deal — including Putin’s friend Yury Kovalchuk.

• The deal to take Yandex’s Russian operations away from the control of founder Arkady Volozh and its foreign shareholders — under discussion since the war broke out — is finally close to completion. On Monday, the company announced plans for the split, including who will be acquiring a controlling stake in the Russian carve-out. The Bell was the first outlet to find out the details and report on the announcement ahead of time.
• The group’s Russian operations will be bought by a consortium led by a fund of senior managers (that could grow to as many as 50 individuals). Alongside them are four key financial investors: oil company Lukoil, venture investor Alexander Chachava, former Gazprom top manager Alexander Ryazanov, and Pavel Prass, general director of registrar company Infinitum, a figure known only to a narrow field of insiders.
• None of the named individuals are under Western sanctions — essential to ensuring that the foreign investors and directors of Yandex can legally approve the deal. Two sources told The Bell they believe at least some of the publicly identified buyers are acting as intermediaries for others who are staying behind the scenes.
• Over the past year, sources for The Bell and Meduza identified several contenders that were lining up to take over Yandex’s Russian business. They included Interros founder Vladimir Potanin, Lukoil co-founder Vagit Alekperov, and Kismet Capital Group founder Ivan Tavrin. State lender VTB was also named a potential player (to structure the deal), as were Faberlic founder and Duma deputy Alexei Nechayev, Gazfond (Gazprom’s pension fund) and Kirill Dmitriyev, head of the Russian Direct Investment Fund. Over the past few months, Potanin became one of the lead negotiators, two sources told The Bell, with his companies actively acquiring Yandex shares on the open market.
• Some of these investors may have been representing the interests of Yury Kovalchuk, one of Putin’s billionaire buddies, two sources said. However, all of them are under sanctions of some form, so they can not openly be involved in the deal. One of the buyers, Pavel Prass, is a longtime associate of Kovalchuk. Another, Alexander Chachava, co-invested in tech startups with Vladimir Kiriyenko, son of top Kremlin official Sergei Kiriyenko and CEO of VK, the second largest Russian internet company. 
• The deal announcement comes in at 475 billion rubles (about $5.2 billion at current rates) after applying the mandatory 50% discount on Yandex’s market valuation imposed by the Russian government on all foreign investors leaving the market. At least half of that will be paid in cash — in Chinese yuan for deals outside of Russia. That money will go to Yandex’s current shareholders — company founder Arkady Volozh and a number of other major foreign investors that hold shares through the stock market.
• The statement did not mention the role of Alexei Kudrin. The former deputy PM and friend of Putin joined the company in 2022 as part of an agreement that was expected to see him become a co-owner of the future business and serve as Yandex’s link to the Kremlin. But circumstances have changed since that approach was floated. While the deal was being negotiated, Kudrin lost his leading role in the talks and also found himself hit with U.S. sanctions. Forbes reported that instead of his promised 5% stake in the company, he might be left with no more than 1.5%.

Why the world should care

At the moment it's not easy to see whose interests are being represented by the new Yandex ownership structure. But there is little doubt that the final agreement will cement the Kremlin's control over the entire online landscape in Russia. Groups linked to Yury Kovalchuk already hold a large stake in Russia's second largest internet company, VK, and now Kovalchuk is gaining influence over the market leader.