Yandex’s $5.5B takeover of Russian digital bank Tinkoff falls through

October 16, 2020.

Russia’s largest tech company, Yandex, dropped a plan to acquire the nation's largest digital bank and second-largest credit card issuer, the companies said Friday.

The $5.5 billion deal’s collapse, which the companies did not further explain, comes less than a month after they revealed they had “come to an agreement in principle.”

Moscow-based Yandex runs Russia’s largest search engine, as well as sizable food delivery, taxi, e-commerce, streaming video and virtual assistant businesses. It’s often described as “Russia’s Google.” 

Taking over Tinkoff, which seeks to slash costs and compete with traditional Russian banks by operating exclusively online, would have bolstered Yandex’s extensive offerings to Russian consumers and put the firm in direct competition with Russia’s big banks like Sberbank and VTB. 

Yandex and Tinkoff did not provide details on why the deal fell through, although pressure has been building on Tinkoff after its founder was charged earlier this year in the U.S. with tax fraud. The companies did not immediately respond for requests for further clarification.

“Yandex regrets to confirm that it has not been able to agree to definitive transaction terms with the core shareholders of Tinkoff,” Yandex said on Friday. “We wish to express our appreciation for the efforts Tinkoff has made in pursuing our discussions, and our continued respect for the Tinkoff team. We wish them well for their future endeavors.”

Tinkoff told investors that the companies still plan to collaborate on current and future projects despite the deal falling through. 

“The Tinkoff team greatly admires the Yandex team and wishes them success in building their business in the future,” the company added.

Tinkoff has benefited from coronavirus-related social distancing rules that have caused consumers to flock to online banking, posting a 25% year-over-year increase in net income to RUB 10.2 billion ($134 million) during the second quarter of this year. 

Rumors that the Yandex-Tinkoff deal was in trouble emerged in Russian media on Wednesday, with Moscow business news publication The Bell reporting that Tinkoff was considering other buyers, including mobile operator MTS or its affiliate MTS Bank. 

According to The Bell, Tinkoff founder Oleg Tinkov has approached at least six potential Russian buyers over the past year and a half, and was conducting discussions with MTS at the same time as Yandex. 

At the same time Tinkoff is reportedly trying to sell the company, the founder is facing increased international pressure, most notably criminal charges from the U.S. over alleged tax fraud. He is fighting a request for extradition from his home in the U.K. as well as suffering from cancer. He was diagnosed with leukemia this spring.

The founder first publicly floated the idea of a Yandex merger at a St. Petersburg forum in 2019, saying that a combined firm would be worth $20 billion, according to the Moscow Times.

Yandex, which is traded in the U.S. on the Nasdaq stock exchange, has also drawn scrutiny from the Russian government.

Last year, a Russian lawmaker introduced legislation that would have forced Yandex to have a higher level of Russian ownership, endangering its Nasdaq listing, according to the Moscow Times. The firm eventually reached a compromise that gave the Kremlin more control over the firm’s ownership changes, intellectual property and consumer data, the paper reported.