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Russia's Yandex proposes restructuring to allay Kremlin fears

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By Reuters
Russia's Yandex proposes restructuring to allay Kremlin fears
FILE PHOTO: The logo of Russian internet group Yandex is pictured at the company's headquarter in Moscow, Russia October 4, 2018. REUTERS/Shamil Zhumatov   -   Copyright  Shamil Zhumatov(Reuters)

By Alexander Marrow and Nadezhda Tsydenova

MOSCOW (Reuters) – Yandex <YNDX.O> announced a restructuring plan on Monday designed to assuage Kremlin fears about potential foreign influence at Russia’s biggest technology company.

Yandex, sometimes referred to as Russia’s answer to Google, provides an array of online services, including taxi hailing and the country’s dominant Russian-language search engine.

The company’s ownership structure has been in focus due to a draft law that would limit foreign shareholdings in Russian internet firms to just under 50% to address Kremlin concerns that user data could fall into foreign hands.

Yandex N.V., the parent company of Yandex Group, is registered in the Netherlands and Chief Executive Arkady Volozh holds 48.41% of the voting rights in the company, according to Yandex’s annual report.

The company said it proposed creating a Public Interest Foundation (PIF) run by a board of 11 Russian nationals that would oversee a “golden share” currently held by state-owned Sberbank <SBER.MM> and have expanded veto powers.

Kremlin spokesman Dmitry Peskov said the plan had not been agreed with the Kremlin beforehand as it was a corporate matter.

But he told reporters the Kremlin was watching the process closely due to the company’s importance for Russia and welcomed the fact it understood its responsibility.

Yandex said the board of the new foundation would include three members of Yandex’s management team – Volozh, deputy CEO Tigran Khudaverdyan, and HR Director Elena Bunina – as well as representatives from five Russian universities and three non-governmental organisations.

The foundation would have certain voting rights, including the power to block a single entity accumulating 10% or more in economic or voting interests, down from the current threshold of 25%.

Sberbank, Russia’s largest lender, said it “in general” supported the proposed changes and its management board would review them on Tuesday.

Critics say Russian authorities have taken steps to tighten control of the internet, threatening to stifle individual and corporate freedom. But the Kremlin says it is trying to protect the integrity of the Russian-language internet.

Yandex also authorised the repurchase of class A shares of Yandex N.V. worth up to $300 million, sending Yandex company shares up around 6.6% as of 1200 GMT.

In a further effort to assuage fears over governance volatility, Volozh pledged not to sell 95% of his class B shares before 2022.

The proposed changes to Yandex’s corporate governance are subject to shareholder approval at a meeting on Dec. 20.

(Additional reporting by Maria Kiselyova, Tatiana Voronova and Katya Golubkova; Writing by Alexander Marrow/Andrew Osborn; Editing by Jason Neely and Mark Potter)