Billionaire Alisher Usmanov tightened his grip over VKontakte, with his Mail.ru Group Ltd. (MAIL) agreeing to boost its stake in Russia’s largest social network to 52 percent.
Mail.ru, an Internet company controlled by Usmanov, agreed to buy a 12 percent stake in VKontakte from Russian executive Ivan Tavrin, according to a statement from Moscow-based Mail.ru today. No price was disclosed. Mail.ru won’t change VKontakte’s operational control or consolidate it into its accounts.
VKontakte may be valued at $2 billion to $4 billion, said Ksenia Arutyunova, an analyst at Rye Man & Gor Securities in Moscow. The company is trying to fend off rivals including Facebook Inc. (FB:US) in Russia and leads the market with Odnoklassniki, another social network controlled by Mail.ru.
“Even though Mail.ru won’t get operational control in VKontakte, this deal is good as it’s a move in the company’s strategy of consolidating social networks in Russia,” said Konstantin Belov, an analyst at UralSib Capital in Moscow.
Mail.ru, which also has assets such as online gaming sites, jumped as much as 6.6 percent, the biggest gain in 11 months. It rose 4.2 percent to $34.58 at 9:45 a.m. in London.
VKontakte had 95 million users in December, including 61 million in Russia, researcher ComScore estimated. Facebook had 13 million Russian users and Odnoklassniki 54 million.
The stake increase also gives Mail.ru an edge over United Capital Partners, a Russian investor who holds the remaining 48 percent of VKontakte. The two shareholders have been at odds over the social network’s management, with UCP calling for the dismissal of co-founder and Chief Executive Officer Pavel Durov, whom Usmanov has supported.
Usmanov is also willing to buy UCP’s stake in VKontakte at a “reasonable price,” Ivan Streshinskiy, head of Usmanov’s asset-management company USM Advisors LLC, said in an interview in Moscow last week. UCP and Usmanov’s representatives each have two of VKontakte’s four board seats.
UCP has claimed that Durov breached his fiduciary duty by developing his own project, the Telegram messenger, separately from VKontakte. Streshinskiy said that Usmanov has been supportive of Durov as his presence in the company ensures success of the social network.
“Durov is still the CEO, but he is distracted by all those legal issues initiated by the other owner,” he said. “If due to this pressure he leaves the company, only Mail.ru has experience to run this business.”
UCP, as a financial investor, is ready to sell its stake in VKontakte once the company reaches its “fair value,” said Nafisa Nasyrova, a spokeswoman for the investment firm.
Durov, in e-mailed comments sent by his press office, said Mail.ru boosting its stake is positive for VKontakte. Mail.ru is a “friendly shareholder interested in the development of VKontakte,” he said.
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