Yandex N.V. leaves Russia in largest corporate exit since the start of the Ukraine war

Yandex N.V. leaves Russia in largest corporate exit since the start of the Ukraine war
The Yandex deal is done in what is the largest corporate exit from Russia since the war in Ukraine started two years ago. / bne IntelliNews
By Ben Aris in Berlin February 5, 2024

One of the longest-running corporate sagas in Russia is finally coming to an end. Yandex N.V. – the Dutch parent of Russia’s biggest internet company –announced its exit from the Russian market on February 5, selling its Russian operations to a consortium led by the local management team for RUB 475bn ($5.2bn). This will be the largest corporate exit from the country since Russia invaded Ukraine in February 2022.

Yandex was among the early pioneers of the internet in Russia and has dominated the space for decades. The local management team is leading a consortium to buy the Russian operations and will continue to run the business there. The Dutch company (YNV), meanwhile, will focus on developing a portfolio of international businesses that co-founder and former CEO Arkady Volozh started working on after relocating to Israel in 2014. Volozh has effectively been side-lined from the operations since he was sanctioned in June 2022 by the EU.

YNV Chairman John Boynton explained the rationale for the transaction in today’s statement: “Since February 2022, the Yandex group and our team have faced exceptional challenges. We believe that we have found the best possible solution for our shareholders, our teams and our users in these extraordinary circumstances. The proposed transaction will allow shareholders to recover some value for the businesses that we are divesting, while unlocking new growth potential for the international businesses we will retain and enabling the divested businesses to operate under new ownership," YNV said in a statement emailed to bne IntelliNews.

The transaction itself will see YNV sell all of its assets in Russia, which have been consolidated into a new company incorporated in Kaliningrad. The consortium of buyers is led by the Russian management team, as well as a number of other financial investors: Argonaut (an investment fund owned by Lukoil); venture capitalist Alexander Chachava, businessman and former lawmaker Alexander Ryazanov, and Pavel Prass, an IT entrepreneur. None of the latter three are exactly household names; but after the board confirmed that they would not transact with any sanctioned individuals, the list of potential buyers started to shrink. 

Once the sale is complete, YNV will hold no interest in the Russian businesses. As well as retaining its portfolio of international AI start-ups, YNV will walk away with the cash from the sale. The company says it plans to return a substantial proportion to shareholders, and also to retain some funding to finance the development of the four businesses: Nebius AI, Toloka, TripleTen and Avride.

The Dutch company – which will rename itself in the coming months – has announced ambitious plans to build up these startups into an AI-focused suite of global businesses, starting from Europe, the US, Asia and the Middle East, where the businesses are already in operation. Key to this ambition will be the approximately 1,000 engineers and developers who left Russia after the war began and are now setting themselves up in the Netherlands, Israel and various other locations.

Given the fate of other companies that have announced plans to leave Russia, Yandex seems to have negotiated a good deal. It is the biggest exit in cash terms by some margin – many other exits have been for nominal sums or seen foreign firms effectively write off their Russian operations. Most notoriously, the Kremlin has simply swooped in and nationalised or otherwise taken control of the Russian operations of a number of big-name international corporates – from Danone and Carlsberg among consumer names to Uniper, Fortum and Wintershall on the industrial side.

It remains unclear why and how Yandex escaped a similar fate, but it seems likely that a high-tech knowledge-based company of Yandex’s complexity would have posed a much more significant challenge to rein in, and with a much higher risk of a state takeover backfiring.

“The company has always had an independent streak and fought fiercely to maintain its special status. Looking at the “trusted hands” that other Western businesses have ended up in, it is hard to imagine who could have been found to run Yandex,” a source close to the deal told bne IntelliNews. “It remains important to the Kremlin to have a large and successful tech company and they realised that you can’t interfere with such a complicated company too much without running it into the ground.”

While the big takeaway from today’s deal may take some time to sink in – few journalists covering Russia probably ever thought they would be writing about Yandex’s parent company  leaving the country. It does appear though to offer both the Russian and international parts of the company a way to move on.

“Yandex is a unique story. I am proud to have been a part of that story since the very beginning, and I am proud to be part of the next chapter. We believe that the proposed sale will position both parts of the current group to develop and grow for the benefit of their stakeholders,” said Boynton.

Another question is what happens to Volozh himself. An independent tech entrepreneur who left Russia a decade ago, Volozh never fit the profile of most sanctioned individuals, and his sanctioning by the EU in June 2022 came as a surprise. In August last year he became the first – to date only – EU-sanctioned individual to speak out publicly and slam Putin’s "barbaric" war in Ukraine. In response the Kremlin called him a traitor and Russian state media launched a crusade against him. The only other prominent Russian businessman to have condemned the war in public is Oleg Tinkov, the owned of Russia’s only purely online bank, Tinkoff Bank, who was also forced to sell out and leave Russia.

Initially, the EU accused Volozh of supporting the Russian government and the war. It seems clear to everyone (including the EU) that this is not the case. But the final remaining legal argument was that Volozh continued to hold shares in a company that owned a substantial business in Russia. Now that Yandex is leaving Russia, this is no longer true. Volozh has effectively burned any remaining bridges he may have had to Russia and will certainly never be allowed to do business there again, according to bne IntelliNews’ source.

What more the EU wants him to do is unclear at this point. With the EU actively discussing which sanctions to renew next month, now would seem to be the right time to take a closer look at the Volozh file.