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20 I Companies & Markets bne December 2019
Yandex already has a golden share that is held by state-owned bank Sberbank since 2009, but this will now be transferred to the Public Interest Foundation.
Sberbank has also been at the forefront of tech innovation and is in the process of transforming itself into a technological platform. The CEO of the bank German Gref has already suggested dropping the word “bank” from its name and rebranding the retail banking giant as simply “Sber”.
However, Yandex has had a complicated relationship with Sberbank. In addition to successful joint projects Yandex Market and Yandex Money, they have also found themselves in stiff competition, particularly after Sberbank bought
a 20% stake in Yandex rival Mail.ru to take its share in the company to 45% and will build up a rival business. The joint venture between Sberbank and Yandex to set up an e-commerce marketplace that would have taken a significant share of the Russian economy into the cloud reportedly ended in divorce in July after only a year of cooperation. But the companies continue to work together and industry insiders close to the two companies say their joint ventures are not only still functioning, but some are highly profitable. Since then Sberbank bought
a 20% in Yandex competitor Mail.ru to take its share in the company to 45% and will build up a rival business.
The restructuring of Yandex’s management and the change
of owner of the golden share will not affect the current shareholder structure of the company where Volozh remains the largest shareholder and in charge of day to day operations.
“We needed to find a decision that would satisfy three sides by keeping management in our hands, reassuring foreign investors about Yandex’s business potential, and defending national interests,” Volozh told staff in his email, explaining the need for the change.
Before the changes are put in place Yandex executives are due to meet with US investors, who own most of its free float, ahead of an extraordinary general meeting (EGM) slated for December 20 where the decision needs to be approved by shareholders.
“I am very committed to this business and urge our shareholders to support the proposals we are announcing today,” Volozh said in a statement. “With this behind us, we can get back to doing what we do best: innovating, providing world-class products and services to our users, and delivering superior returns to our investors.”
Striking the balance between corporate needs
and public interests
The new structure also removes the danger that control of the company could easily fall into the hands of foreign portfolio investors, most of which are American.
The quirks of the shareholder structure means that the shares of the company’s CEO Volozh give him a de facto majority control of corporate voting. However, if Volozh were to die
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these voting rights would be cancelled and the votes would transfer to the publicly owned shares, giving the majority control in the company to the public shareholders – something the Russian government was not happy about.
“No country in the world would like to see its biggest tech company that is deeply wired into its economy suddenly controlled from abroad overnight. This is not just a Russian issue. This is a global issue,” a market participant told bne IntelliNews. “This deal is a delicate balancing act of addressing Russia’s legitimate national security concerns but at the same time leaving
“We needed to find a decision that would satisfy three sides by keeping management in our hands, reassuring foreign investors about Yandex’s business potential, and defending national interests”
one of Russia’s best and most successful management teams in control of the company in a deal that should also be acceptable to the company’s international shareholders.”
“The amendments include the creation of a Public Interest Foundation (PIF), with no economic rights, but with certain limited governance rights. The Company’s Priority Share, currently held by Sberbank, will be transferred to the PIF and its terms will be amended. The amended Priority Share will give the PIF the right to block the accumulation by a single entity, or a group of related parties acting in concert, of shares representing 10% or more of economic or voting interests in Yandex (compared with the current threshold of 25%),” Yandex said in a press release.
The proposed changes have to be approved at the EGM
in December and requires 75% approval from the Class A Shareholders, so in this case Volozh alone won’t be able to push the deal through. There are a number of complicated corporate governance changes on the docket for the EGM that have to be approved by shareholders that include the creation of two new directors on the board that are there to represent the public interest. The powers of these directors is limited to questions that affect the public interest and national security concerns and the overall management of the company is left to its existing team.
“The PIF’s two designated directors will also serve on a newly created Public Interest Committee of the Yandex NV board, which will have oversight over a limited and clearly defined set of questions deemed to be of public interest,” Yandex said in
a press release and went on to name those rights as:
• Transactions involving the sale or transfer of material intellectual property