Russia's Yandex to buy out Uber from joint ventures for $1bn

Yandex, Russia's biggest internet company, has said it plans to buy Uber's shares in their joint self-driving vehicle and food-delivery businesses and increase its stake in their joint mobility-focused unit in a deal valued at $1 billion.

Yandex will buy Uber's 33.5 per cent indirect interest in Yandex.Eats, Yandex.Lavka and Yandex.Delivery, as well as its 18.2 per cent stake in the Yandex Self-Driving Group to full own the four businesses, the Russian technology company said on Tuesday.

The deal will also give Yandex an additional 4.5 per cent interest in the mobility-focused joint venture MLU, raising its stake to 71 per cent. It will also receive a two-year call option to acquire Uber’s remaining 29 per cent stake in MLU for up to $2bn.

The newly restructured MLU will continue to focus on mobility businesses, including ride-hailing and car-sharing services, Yandex said.

"The consolidation of these businesses puts us in a great position to further increase strategic management flexibility, while creating new substantial growth potential for our businesses and cross-platform consumer benefits over the years to come, allowing us to unlock new sources of value for our shareholders,” said Tigran Khudaverdyan, deputy chief executive of Yandex.

Yandex, a top search and ride-hailing service provider in Russia, will also extend its licence for the exclusive right to use the Uber brand in Russia and certain other countries until August 2030, assuming the exercise of the option, it said.

Yandex's acquisition of 4.5 per cent of MLU and 18.2 per cent of the Yandex Self-Driving Group is expected to close by the end of the third quarter of this year, the company said.

The demerger of Yandex.Eats, Yandex.Lavka and Yandex.Delivery from MLU and subsequent acquisition of Uber’s interest in these businesses is expected to be completed by the end of 2021.

The deal has been approved by the boards of both Yandex and Uber and is not subject to antitrust or other regulatory approvals.

Yandex had been looking to buy out Uber for more than a year as the Covid-19 pandemic spurred demand for delivery and food services in the Russian market.

Uber merged its operations in Russia and neighbouring countries with Yandex in February 2018, in a deal that valued the unit at $3.8bn. Since then, the joint venture expanded into other businesses such as food delivery and drones.

Yandex.Eats is a food and grocery delivery service found in more than 170 cities in Russia and across the Commonwealth of Independent States. It offers 30-minute to 60-minute deliveries from over 35,000 restaurants and more than 2,900 shops.

Yandex.Lavka is a local convenience shop delivery business that offers 15-minute deliveries from more than 360 shops in Russia and Israel.

The Yandex Self-Driving Group has been developing proprietary self-driving technology since 2017. As of Tuesday, it had 170 cars in its self-driving fleet.

Since late 2019, the company has also been developing its own robot, named the Yandex.Rover, for the delivery of small and medium packages.

Yandex.Rovers are already delivering orders to customers in Russia and the US, where the company recently announced a partnership with Grubhub to provide food delivery services to college campuses across the US.

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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