The Board of Russian tech giant Yandex announced last Friday that it had “commenced a strategic process to review options to restructure the group’s ownership and governance”, citing “the current geopolitical environment.” In particular, the Board confirmed that it would explore options “to enable the development of certain services (including the international divisions of self-driving technologies and cloud computing) independently from Russia,” while potentially divesting all other businesses, too (including search and advertising, mobility, e-commerce, food-delivery, delivery, entertainment services and others in Russia and international markets).
Put more simply, the Dutch parent company will look to divest its entire Russian business, along with a number of connected international assets (including taxi, mobility and delivery services which are also present in Central Asia, Africa and the Middle East). The parent will retain four international start-ups: self-driving technologies, cloud computing, ed-tech and data labeling, betting that they all have significant global potential if they can successfully sever their ties to Russia.
Friday’s statement from the Board provided little in the way of specifics in terms of how the restructuring could be implemented. However, bne sources confirm that the Board is meeting this week in Istanbul with this question high on the agenda. A source close to the Board cautioned that "this transaction would be highly complex, and it may take weeks if not months to flesh out the details.” The source also pointed out that “any transaction affecting governance or control would need to be approved by shareholders”.
While shareholders will have the final say on the restructuring, in the current environment transactions of this nature also need political approval. This is where Alexey Kudrin comes into the picture. As one of the few prominent liberal, Western-leaning marketeers left in Russia, Kudrin, has a lot of value he can bring to Yandex in this context. Most importantly, he would understand the value of keeping Yandex independent from the state, but at the same time he has the access and credibility to get political buy-in from the president – probably the only person left in Russia who can do that.
According to a source familiar with the matter, Kudrin, who is advising the Board in an informal, personal capacity, was able last week to agree that the restructured Yandex should remain an independent company, as free from state control as possible.
What next for Yandex 2.0?
The company’s last set of quarterly results suggest that the underlying Russian business remains strong, with total revenue up 46% year-on-year at 133 million rubles. There has been no indication that the post-restructuring Yandex 2.0 would scale down its presence in the roughly 20 countries across Central Asia, Africa and the Middle East where it owns assets, including the new Yandex Taxi service in Dubai.
That said, the Kremlin’s classification of most Western nations as “unfriendly countries” means that the Russian tech giant can probably expect to receive an “unfriendly welcome” in those countries for the years to come.
Meanwhile, the clutch of international start-ups which will break off from the Russian business would be grouped under a re-named Dutch entity, according to the Board’s plans. bne sources confirm that the intention is for the international technology company to be headquartered in Amsterdam, with its main R&D facilities in Israel and Europe.
Just before the start of Russia’s invasion of Ukraine, the self-driving car business, one of the world’s leading self-driving companies, had successfully launched in the West with plans to go further. The war inevitably brought those plans to a sharp halt, which the company hopes will only be temporary.
As to the Cloud business, this industry is currently dominated by players in the US and China – EU officials may see the Dutch offering as an opportunity for Europe to develop its own “homegrown” Cloud operator.
One enduring problem for the future international business is the fact that Yandex co-founder Arkady Volozh, the natural leader for the business, remains sanctioned by the EU. As bne reported previously, the decision to sanction Volozh took the business community by surprise.
Volozh, a computer scientist by training, left Russia after the annexation of Crimea, and has since been predominantly focused on the group’s international projects. While he is an intensely private character, Volozh has no discernible ties to the Kremlin, and hasn’t visited Russia since the war started. In June, after being sanctioned by the EU and Switzerland, Volozh stepped down from his executive position within the Group and gave up all voting rights.
While the Board’s ultimate intentions for the future of the group are more or less clear, the execution will not be simple. But whatever proposals the Board comes up with, it will be Yandex’s 10,000 or so public shareholders who will ultimately decide the company’s fate.