Fresh Blood: why Yandex buys Tinkoff

Uncategorized — “Yandex” has tentatively agreed to purchase the Tinkoff Bank for $5.5 billion. This was reported by the bank’s parent company, TCS Group, on the London Stock Exchange. Cyprus TCS is the sole shareholder of Tinkoff Bank, the holding also includes Tinkoff Insurance and other assets.
The news appeared on the evening of Tuesday, September 22, and in the first 25 minutes after the announcement, Yandex shares on the Nasdaq rose by 4.3% — from $59.2 to $61.7 per paper. Later, the growth adjusted to 3.86%. TCS receipts on the Moscow Exchange increased by more than 6%, to 2,079. 8 rubles. The London Stock Exchange, where TCS shares are traded, was already closed by the time the information was published.

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Yandex offered TCS Group shareholders to buy back 100% of the company’s shares, and the parties came to a preliminary agreement on the transaction. It will be paid partly in cash, partly in shares. The premium to the current market price of TCS will be 8%.
The purchase is likely to pass through an offer to minority shareholders, Sergey Suverov said in a comment to RBC investment strategy “Arikapital”. The premium to the share price in this deal is “not very large”, although Tinkoff is a fast-growing company: this may indicate that there were no other bidders for the purchase.
“Most likely, the sale is related to the illness of Oleg Tinkov and the fact that fresh blood is needed for the development of the company. “Yandex” does not look like the worst buyer, given its reputation, both companies built the brand quite actively, ” the expert says.
Oleg Tinkov, the founder of Tinkoff Bank, owned 40.4% of TCS directly until March 2020. In early March, he announced that he was struggling with an acute form of leukemia, and in April he announced that he had transferred his share to a family trust and left the post of chairman of the board of directors of Tinkoff Bank. Another 6.5% of TCS is held by the company’s management.
Tinkov’s fortune, if you include the income of the businessman’s family trust from the recent sale of 40.2% of the shares, will more than double after the transaction is completed. In March 2020, Russian Forbes estimated his capital at $1.6 billion, and his trust can earn $2.2 billion on the deal.
Yandex founder Arkady Volozh and Tinkov first publicly discussed the possibility of a merger at the St. Petersburg Forum in June 2019. “I believe that if we unite <…> with Yandex, then there will not be enough for Sberu, the capitalization of this company will be more than $20 billion at once,” Tinkov ironically answered a question from the audience. Volozh, in turn, jokingly noted that Tinkov is only spreading rumors.
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A month later, Alfa-Bank analysts already described the scenario of creating a joint venture between Yandex and Tinkoff Bank. And this is despite the fact that the chairman of the board of the credit institution, Oliver Hughes, in an interview for the project “Russian Standards” in August 2020, claimed that “this topic does not exist.”
In June 2020, Yandex announced the division of assets with Sberbank. The IT company sold a 25% stake in Yandex to the state bank.Money” and at the same time bought 45% in Yandex.Market from him, having the opportunity to develop projects in the field of financial technologies. Prior to this, the terms of the partnership of companies in the JV “Yandex. Market” forbade Yandex to do this. The parties are going to close the deal in the third quarter of 2020 — the preliminary total amount of the sale is 2.4 billion rubles.
“Now we see that Yandex is building many different verticals — in the segment of advertising, mobility, retail, etc. With the help of a deal with Tinkoff Bank, Yandex is trying to build a fintech vertical. This segment is where Internet companies will dominate in the near future, so such a move seems logical, “Aton analyst Viktor Dima said in a comment to RBC.
Analysts at The Bell pointed out in their comments that Yandex needed its own fintech: only in this way will it be able to build a full-fledged ecosystem and save on transactions inside the marketplace, taxi services and food. In addition, the purchase of Tinkoff Bank can play an important role in the growth of Yandex’s capitalization: the multipliers of IT companies are higher than those of banks — if investors start looking at Tinkoff Bank as an Internet business, Yandex will clearly be in the black.
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However, BCS asset manager Andrey Rusetsky said in a comment to RBC that the deal “looks ambiguous”: “Yandex” showed interest in fintech, but the purchase of a bank of this size, which specializes in consumer lending,” is quite unexpected. According to him, the IT company essentially recognizes that it has reached the ceiling of growth in the advertising segment, and “retreats from the strategy of growing new directions within itself and immediately acquires a ready-made business.”
In a letter to Tinkoff Bank employees yesterday, Hughes expressed hope that the negotiations would be successful. “And we will all witness a real world-class hyper-deal and be involved in the creation of the largest fintech company in the world,” he wrote.
(Text prepared by Yana Shebalina)

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