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companies recently asked for informal permission from Russian authorities to split the assets of their O2O JV, as the parties reportedly disagree on how to develop the JV going forward. According to FT’s source, the companies are “basically not talking any more”, but they have yet to agree on how and when to split the assets.
SBER issued a comment following the publication of the article in which it said that the businesses within the O2O JV are rapidly and successfully developing, and that the value of the JV is much higher than the investments being made in it. SBER also acknowledged that MAIL has expertise in creating complex IT solutions and is an equal partner in the JV. The company emphasized that it is developing services within its ecosystem in close integration with each other.
As a reminder, SBER and MAIL started work on the O2O JV in July 2019. The JV consolidates the companies’ assets in FoodTech (e.g. Delivery Club, a food delivery service; Samokat, a grocery delivery service from dark stores; and Local Kitchen, a food delivery service from dark kitchens) and mobility (e.g. ride-hailing service Citymobil and carsharing service YouDrive). SBER and MAIL each own c. 45% of the JV, while the rest is reserved for the management motivation program. According to MAIL’s IFRS reporting, the O2O JV generated a loss of RUB 37.6bn in FY20, with MAIL’s share of the loss reaching RUB 17.8bn. We note that Yandex.Taxi, one of the O2O JV’s main competitors, generated RUB 3.4bn in adjusted EBITDA in FY20.
FT first reported that the parties seemed to disagree over how to run the O2O JV in November 2020. In the middle of March,Forbes reported that the SBER-MAIL split was still on the agenda. According to Forbes’ sources, one of the options discussed was divvying up the assets, with SBER getting Citymobil and MAIL getting the food delivery assets. According to Forbes, the reasons behind the disagreement between SBER and MAIL are similar to those that led to SBER’s split with YNDX, including a lack of clarity on who “owns” the JV’s clients, as well as different ideas of how to develop the JV and disagreements over joint spending in the partnership.
Implications for MAIL. We continue to see the news as mildly negative for MAIL for now. Whether splitting up is a good solution depends on which partner receives which assets and on what conditions, and whether the partners have the execution capacity to take care of those assets on their own. We think the divorce between SBER and YNDX in 2020 was a win-win for both companies, but this may not necessarily be the case for the O2O JV. We value the O2O JV at around $2bn, with MAIL’s stake in it accounting for 10% of our SOTP valuation of the company.
Implications for SBER. For SBER, the potential break-up would
142 RUSSIA Country Report April 2021 www.intellinews.com