Yandex May Come Under State Control

Sberbank is in negotiations to purchase shares of Yandex, according to a source familiar with one of the bank’s top managers, as reported by Vedomosti. The source says at least two deal options are being considered:

• The state-owned bank gaining actual control over the company (through voting shares);
• Purchasing at least 20% of the shares.

With the prospect of Yandex coming under state management, the company’s shares fell by 8% on October 18, 2017. In less than a day, Yandex lost about $1.5 billion in market capitalization.

Sberbank itself denies the negotiations. Arkady Volozh, Yandex’s largest shareholder, declined to comment, but the market clearly believes the rumors. In comments to Vedomosti, both a federal official and another person familiar with the matter through a different federal official confirmed the talks. One of them noted that Sberbank is not the only contender to buy Yandex.

Key Shareholders and the “Golden Share”

Transferring Yandex to state control would almost certainly require the involvement of Arkady Volozh, the company’s largest shareholder. Yandex has issued two classes of shares: Class A (1 vote per share) and Class B (10 votes per share). At the start of this year, the largest shareholder owned 10.35% of the capital and 49.2% of the votes, but Arkady Volozh has gradually sold shares this year, reducing his stake to 9.8%.

Other major shareholders include one of the company’s first employees, Vladimir Ivanov (3.83% of capital, 6.23% of votes), and the American company WMC (5.12% of capital, 2.46% of votes).

Until now, Sberbank only owned a “golden share,” which gives it the right to veto the sale of more than 25% of Yandex’s shares. Sberbank acquired this golden share in 2009 for 1 euro. Since then, the partnership has developed: first, the joint venture Yandex.Money was launched, then Herman Gref joined Yandex’s board of directors, and last year the partners launched the online store Beru based on Yandex.Market.

Government Interest and Control

The idea of bringing Yandex under state control has been raised multiple times by officials and security agencies. High-level meetings have been held on the topic. The reason, according to a source familiar with the matter through another official, is Yandex’s significant media presence and the inability to control the system. “The process [of taming Yandex] is underway,” the source summarized.