(Bloomberg) -- Months after Russia’s leading technology company ended a partnership with the country’s biggest bank, the two are heading for a showdown as they build rival ecosystems.
Yandex NV said it’s in talks to buy Russia’s leading digital bank for $5.48 billion on Tuesday, a challenge to former partner Sberbank PJSC as the state-controlled lender seeks to reposition itself as a technology company that can provide consumers with services from food delivery to telemedicine.
The cash-and-shares deal for TCS Group Holding Plc would be the biggest in Russia in more than three years and add a missing piece to Yandex’s portfolio, which has grown from Russia’s leading search engine to include the country’s biggest ride-hailing app, food delivery and other ecommerce services.
“The acquisition of Tinkoff Bank enables Yandex to offer financial services to its 84 million users,” Mikhail Terentiev, head of research at Sova Capital, said, referring to TCS’s bank. “The pending deal poses a challenge to Sberbank in the banking business and for investment dollars: by buying Tinkoff, Yandex becomes a larger and more attractive company.”
Sberbank is by far the largest lender in Russia, where most of its 110 million retail clients live. Its chief executive office, Herman Gref, has made it his goal to turn the successor of the Soviet Union’s savings bank into a tech company.
Yandex’s announcement came just as Sberbank plans to announce an ambitious re-branding effort at a conference this week. It is widely expected to drop the word “bank” from its name in order to emphasize its new mission.
“We are not afraid of competition and respect our competitors,” Gref said by text message about the potential deal.
In 2017, as Gref sought to expand into technology, Sberbank invested 30 billion rubles ($394 million) in Yandex.Market, with plans to turn the price-comparison website into a major ecommerce player.
However, by this June tensions between Yandex’s billionaire founder Arkady Volozh and Gref led to the end of their joint ventures and their non-compete agreements. Sberbank has since expanded its partnership with Mail.ru Group Ltd, Yandex’s biggest rival.
“This deal would make it harder for Sberbank” to make a competitive ecosystem, VTB analyst Mikhail Shlemov said. “We believe it could create more incentives to deepen cooperation between Sberbank and Mail.ru.”
TCS Group’s billionaire shareholder Oleg Tinkov, who in March announced he was receiving treatment for leukemia and also faces claims from the U.S. Internal Revenue Service, said on Instagram he will keep a role at the bank.
“This isn’t a sale but more of a merger,” Tinkov wrote. “I will definitely remain at @tinkoffbank and will be dealing with it, nothing will change for clients.”
A formal offer hasn’t yet been made and the deal, which offers an 8% premium to TCS Group’s closing price on Sept. 21, is still subject to due diligence. Payment will be evenly split between cash and equity, Vedomosti newspaper reported.
“After the divorce with Sberbank, Yandex said it was studying options in the fintech sector,” Raiffeisenbank analyst Sergey Libin said by phone. “In order to create an ecosystem to compete with the alliance of Sberbank and Mail.ru, you have to go to financial services.”
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