TheChek News Flow

Payout comes as Italian bank reports better than expected quarterly profits

UniCredit has announced plans to return €8.6bn to investors after Italy’s second-largest bank reported quarterly profits that trounced analysts’ forecasts.

The payout, which will come via a combination of buybacks and dividends, caps a buoyant 12 months for UniCredit, which has enjoyed a windfall from higher interest rates.

The Milan-based bank disclosed the planned payout as it reported fourth-quarter profits of €1.9bn, almost triple analysts’ forecast. The better than expected performance was down to higher rates continuing to buoy the bank’s net interest income and lower provisions for bad debts, it said.

Chief executive Andrea Orcel said the decision to lift the full-year payout was “underpinned by extremely strong organic capital generation and with sustainability of returns secured by our strategic momentum and significant excess capital”.

However, the benefits from higher interest rates are expected to diminish as the European Central Bank weighs whether to cut interest rates in the face of a slowing eurozone economy.

Profits for the final quarter of last year were up on the €1.6bn the bank made in the same period in 2022.

Since Orcel joined in April 2021, UniCredit shares have been one of the best-performing among European banks. Investors are expected to back his appointment to a second three-year term at an annual shareholder meeting.

The €8.6bn UniCredit intends to return to shareholders will be made up of €5.6bn in buybacks and €3bn in dividends.

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- The cash consideration will be paid in Chinese Yuan (CNH) outside of Russia

- The consortium includes a fund ultimately owned by oil major Lukoil

- Yandex N.V., the Dutch parent company of the Yandex group (“YNV”), today announces that it has entered into a definitive agreement with a purchaser consortium (the “Purchaser”) to sell all of the Yandex group's businesses in Russia and certain international markets. The total consideration for the sale will be RUB 475 billion, subject to adjustments and payable in a combination of cash and Class A shares of YNV. At least 50% of the consideration will be paid in cash. The proposed sale will be presented for approval at a meeting of the Class A Shareholders (the “Class A Meeting”) and a separate Extraordinary General Meeting of Shareholders (the “EGM”). YNV will provide a notice of the meetings, together with a detailed shareholder circular outlining the terms and background to the transaction, in the coming days.

The Transaction

Under the terms of the proposed transaction, YNV will sell its entire interest in IJSC “Yandex”, an international joint stock company incorporated in Russia that will hold all of Yandex's assets and operations in Russia and certain international markets (the “Target”). Following the successful completion of the transaction, in full compliance with international sanctions where applicable, YNV will hold no interest in its businesses in Russia. YNV will continue to hold the four international businesses described below (see Future of the YNV Group Post-Divestment), as well as the net cash proceeds of the sale. In addition, the number of Class A shares that will be outstanding following the transaction will be reduced by the amount of the consideration that is satisfied in the form of Class A shares.

The consideration value YNV has negotiated and agreed with the Purchaser reflects a mandatory discount of at least 50% to “fair value”, as currently imposed as a condition to the required approval by the Government Commission for the sale of Russian assets by parent companies that are incorporated in countries considered by the Russian government to be “unfriendly”, including the Netherlands. The aggregate market capitalization of Yandex N.V. (including the businesses to be divested and the international businesses to be retained), was approximately $10.2 billion (RUB 918 billion) based on the volume-weighted average sale price per Class A Share on the Moscow Exchange in the three-month period ending January 31, 2024. The businesses being sold represented more than 95% of the Yandex Group's consolidated revenues in the first nine months of 2023, and approximately 95% of the group's consolidated assets and employees.

The consideration will be paid in a combination of: (i) a cash equivalent of at least RUB 230 billion; and (ii) the transfer to YNV of up to approximately 176 million YNV Class A Shares (the “Consideration Shares”). We understand that the Purchaser already holds or will acquire the Consideration Shares, subject to the requisite YNV shareholder approval and regulatory consents being procured, from holders in Russia either for cash or shares in Target. The cash consideration will be paid in Chinese Yuan (CNH) outside of Russia.

YNV intends to retain a portion of the net cash consideration (after adjustments, applicable taxes and other expenses) to finance the development of the retained international businesses, and ultimately to return a substantial proportion of such net proceeds to our remaining shareholders, which we currently expect will be through a share repurchase offer.

The sale transaction has been approved unanimously by our Board of Directors and will require the approval of a simple majority of the votes cast at the Class A Meeting and at the EGM, respectively.

The Purchaser

The Purchaser is “Consortium.First”, a newly formed closed-end mutual investment combined fund managed by “Solid Management”, a Russian joint stock company and licensed trust manager, as trustee. The Purchaser consortium, led by members of the senior management team of our Russian businesses, and supported by four financial investors, is described below. None of the members will have a controlling stake in the Purchaser consortium.

Completion of the Sale

The sale transaction will be implemented in two closings. At the first closing, we will sell a controlling stake in the Target of approximately 68% to the Purchaser for consideration consisting of a combination of the cash equivalent of RUB 230 billion and up to 67.8 million YNV Class A shares.

The first closing is subject to certain conditions precedent, including receipt of required regulatory approvals and our shareholder approval, as well as the absence of any applicable sanctions or prohibition on completion. We anticipate that the first closing will occur in the first half of 2024.

At the second closing, the Purchaser will pay for the remaining stake of the Target in a combination of YNV Class A shares and cash. The second closing will occur within approximately seven weeks following first closing.

YNV plans to apply to delist its Class A shares from the Moscow Exchange, to be effective as of the second closing. The Target is expected to obtain public status and a listing on the Moscow Exchange in advance of the first closing.

Lately, it seems like a lot of large technology acquisitions have fallen apart following pushback from European and U.K. antitrust regulators. In tandem, the value of these deals that didn’t get done continues to mount.

The latest scuttled transaction, Amazon’s planned purchase of robot vacuum maker iRobot for around $1.35 billion, would have been one of the largest in the consumer electronics space. On Monday, however, the retail giant announced it has terminated the acquisition, citing “undue and disproportionate regulatory hurdles.”

The deal faced scrutiny from both U.S. and EU antitrust regulators. However, it was the latter that objected most forcefully and publicly, with the European Commission warning in November that the proposed tie-up could hamper rival robot vacuum brands’ ability to compete.

The Amazon deal was the latest merger involving American technology companies to come apart in the wake of objections from EU and U.K. regulators. But it was by no means the largest. Others include:

By this sampling alone, more than $70 billion worth of planned acquisitions by American technology companies have not come to fruition following scrutiny and objections from EU and U.K. antitrust authorities. That said, it’s pretty common for scuttled deals to have faced regulatory pushback from both sides of the Atlantic.

For instance, the largest withdrawn merger — the Nvidia-Arm tie-up — faced considerable scrutiny from U.S. authorities. In the end, the U.S. Federal Trade Commission concluded that the deal would likely harm competition in the semiconductor industry.

Several media outlets also reported that the FTC planned to reject Amazon’s deal with iRobot, although the agency didn’t disclose this publicly prior to Monday’s termination announcement. In recent years, the agency, under Chair Lina Khan, has been more aggressive in reining in or rejecting acquisitions by large technology companies.

Meanwhile, several Big Tech acquisitions announced in the past few quarters have yet to close, and could likely face regulatory objections. This includes Qualcomm’s planned purchase of Israeli semiconductor company Autotalks. Big Tech investments in generative AI, including Microsoft’s funding of OpenAI, have also attracted the attention of U.S. and European regulators.

Others have gotten done, such as Broadcom’s purchase of VMware, which closed in November.

Expectations of stepped-up antitrust enforcement is likely a contributing factor to a slowdown in technology M&A activity in recent quarters. Per Crunchbase data, acquisitions of venture-backed startups hit an eight-year low last year.

Of course, there are other factors to point to besides regulatory pushback. Cash has become more expensive, while many startups have seen their valuations plummet from the highs of 2021.