Yandex, the NASDAQ-listed Russian Internet giant, has agreed in principle with TCS group – controlled by Russian billionaire Oleg Tinkov – the acquisition of its online banking and financial services company Tinkoff.
“The parties have come to an agreement in principle on a transaction that would consist of cash and share consideration worth approximately $5.48 billion or $27.64 per Tinkoff share,” Yandex stated yesterday.
The exact split between these two forms of payments has not been announced yet, but Reuters reported from two “sources familiar with the matter” that one half of the deal should be paid in cash and another half with Yandex shares.
When exactly the deal will close is not known either yet, as it is “subject to the satisfactory completion of due diligence and the agreement on definitive documentation, including the agreement regarding conditions to closing”.
Should it be confirmed, the transaction would represent a premium of approximately 8% to the closing price per Tinkoff GDR of $25.60 on September 21, prior to the announcement.
Maria Sukhanova, an analyst at BCS brokerage, told Reuters that Yandex would have to take on more debt or issue new shares to pay for the deal. She believed the deal will give Yandex potential synergies in data and products, but also exposes it to banking risks, which means it is crucial to retain the TCS management team.
Tinkov himself, who is battling leukemia in London, told the news agency that he would stay with the company after its merger with Yandex.
More than just online banking
Tinkoff touts itself as an “ecosystem” that “offers a full range of financial services for individuals and businesses.” Its key asset is award-winning Tinkoff Bank, which was founded in 2006 and has since become one of the world’s biggest independent direct banks with over 10 million customers. But not only that: with its focus on lifestyle banking, the Tinkoff ecosystem “enables customers to assess and plan personal spending, invest their savings, earn loyalty programme bonuses, book trips, buy movie tickets, make restaurant reservations and much more.”
Tinkoff also has “a proprietary network of smart couriers” who can deliver the company’s products “anywhere in Russia in the shortest time span possible.”
The company also claims to “make active use of AI and machine learning technologies to streamline communications,” with “over 30% of customers’ chat queries resolved” with no human involvement.
All Tinkoff products and most of its IT systems have been developed in-house. Some 70% of the bank’s HQ staff are IT specialists.
Yellow logotypes
The idea of combining Tinkoff with Yandex was first publicly discussed half jokingly by their respective CEOs at the St. Petersburg Economic Forum in June last year. While noting that there was much yellow color in the logotypes of both companies, Tinkov said that their capitalization in case of a merger could “immediately reach more than $20 billion” due to the fact that “the best talents work there.”
However, Yandex was not allowed to consider such a deal at that time due to its e-ommerce joint venture agreement with Sberbank. As noted by The Bell, this agreement forbid Yandex to develop projects in the field of financial technologies – but the Internet company has been relieved from this restriction since it parted ways with Sberbank in June this year.
Since earlier this year, Tinkoff Bank founder Oleg Tinkov has battled tax-evasion charges in the US, in addition to leukemia. As noted by Meduza, He’s currently free on bail in Great Britain, awaiting an extradition court’s ruling and facing up to six years in prison if convicted in the US.
The sale of Tinkoff Bank to Yandex is expected to increase the Russian businessman’s fortune, which is currently estimated by Forbes magazine at $3 billion.
Read here Sova Capital’s detailed analysis of the parameters and implications of the deal.
