Page 11 - bne_Tech_10_2020

Investment
October 2020 www.intellinews.com I Page 11
Russian banking TCS Group reportedly eyed by
MTS Bank
Russian MTS mobile major and operator of MTS Bank could bid for banking TCS Group, which runs the only pure online bank in Russia, Tinkoff Bank, The Bell reported on October 14 citing unnamed sources close to the negotiations.
As reported by bne IntelliNews, Russian internet major Yandex in a bombshell announcement said it intends to acquire TCS for $5.5bn, which made both companies gain over $2bn in value.
But The Bell claims that Yandex may not be the only bidder for TCS, claiming that Oleg Tinkov, TCS’ main owner, has been talking directly with Vladimir Evtushenkov, the founder of multi- industry investment conglomerate AFK Sistema, MTS’ ultimate beneficiary.
Although no binding decisions have reportedly been made, and the report remains unconfirmed, the shares of Sistema and TCS jumped by over 5% on October 14.
Reportedly, Sistema would finance the deal with loans from state-controlled bank Sberbank, which is in increased rivalry with Yandex, which has ventured on to the financial services terrain.
"It is hard to assign probabilities to potential outcomes in M&A sagas, but we do not think MTS is a likely suitor for TCS, as MTS’ balance-sheet firepower is much more limited compared to Yandex," Sova Capital commented on October 15.
Sova analysts believe that a large M&A would also be too much of a departure from MTS’ strategy, which seems to emphasise stable dividends, and see Yandex as a more suitable bidder for TCS.
BCS Global Markets sees the unconfirmed news as neutral for now, but warns that should the original Yandex/TCS deal not happen, it would be negative for sentiment for both names. For MTS, BCS GM believes the synergies from the deal would be limited, while it would cause a significant jump in debt.
Sova reminds that MTS has less balance-sheet capacity than Yandex, as MTS’ 2020 estimated Net Debt/Ebitda ratio is 2.2x and its market cap is only $8.5bn versus $4.9bn for TCS. "In order to buy 100% of TCS at its current market cap (without a premium), MTS would need to raise the equivalent of 1.8x its annual EBITDA," on Sova's estimates.