By Alexander Marrow, Darya Korsunskaya and Polina Devitt
LONDON (Reuters) -Yandex NV has struck a 475-billion-rouble ($5.21 billion) deal to sell what has been dubbed "Russia's Google (NASDAQ:GOOGL)" to a group of Russian investors, marking the biggest corporate exit from the country since Moscow invaded Ukraine almost two years ago.
The Kremlin-engineered deal would see Russia's largest technology player fall entirely under Russian ownership, including a fund ultimately owned by oil major Lukoil, and cement Yandex (NASDAQ:YNDX)'s departure from Western tech circles.
Once seen as one of the few Russian companies with the potential to become a global business, Nasdaq-listed Yandex had developed leading online services, including search, advertising and ride-hailing in Russia.
Its co-founder Arkady Volozh, who moved from Russia to Israel in 2014, slammed Russia's invasion of Ukraine as "barbaric" in August, leading some within the Kremlin to push to nationalise Yandex, people familiar with the matter said.
But ultimately, fear of a technology brain drain helped keep that prospect at bay and has resulted in a complicated deal under which Yandex businesses accounting for more than 95% of revenues would remain in Russia and come under Russian control.
The Kremlin, which welcomed the deal, has been engaged in negotiations with Yandex for around 18 months to try and spin off the Russian businesses from Yandex NV, its Dutch parent.
Yandex has always sought to portray itself as free from Kremlin influence, a task that has become more challenging as the company has become such a strategic national asset.
The deal calculates Yandex's market capitalisation at $10.2 billion, based on a three-month weighted average for its shares on Moscow Exchange. In late 2021, before Russia's invasion, Yandex's market value had approached $30 billion.
The sale price reflects "a mandatory discount of at least 50% to 'fair value'", Yandex NV said. Russia's government must approve deals involving foreign asset sales and demands a discount of at least 50%.
Almost 88% of Yandex's ownership structure is currently free-float, with many Western funds among its shareholders.
Yandex NV said in a statement that the deal would consist of a cash equivalent of at least 230 billion roubles and up to around 176 million Yandex NV Class A shares.
"The cash consideration will be paid in Chinese Yuan (CNH) outside of Russia," Yandex NV said, adding that it would cease using the Yandex brand following completion of the deal.
'EXTRAORDINARY CIRCUMSTANCES'
The buyer, Consortium.First, is a newly-formed investment fund managed by trustee Solid Management. It was led by members of Yandex's senior management team in Russia and supported by four financial investors including Argonaut, an investment fund ultimately owned by Lukoil.
Three other companies - Infinity Management, IT.Elaboration and Meridian-Servis - owned by Alexander Chachava, Pavel Prass and Alexander Ryazanov respectively, were also among the buyers.
Yandex NV made clear that no members of the consortium are under U.S., EU, British or Swiss sanctions. That requirement has ruled out other potential Russian buyers, sources have told Reuters.
The sale, once given regulatory and shareholder approval, is set to be completed in two stages, the first of which is anticipated to close in the first half of 2024, with the second stage following within seven weeks.
Yandex NV plans to delist its Class A shares from Moscow Exchange, expected after Yandex has obtained a new public listing.
John Boynton, chairman of Yandex NV's board of directors, said the team had found the best possible solution for its shareholders and users in "extraordinary circumstances".
Yandex NV will retain a portfolio of four early-stage tech businesses in the cloud, data solutions, self-driving and education technology sectors.
It will also keep a data centre in Finland, as well as the "core intellectual property asset" of 1,300 employees, and transitional licences through 2024.
In a letter to employees in Russia, Yandex managers said the main task had been to avoid destroying its essence, stressing that Yandex would remain independent.
($1 = 91.1500 roubles)