Google Buys Russian Contextual Ads Service for $140m

BREAKING NOW: Google is buying Russian contextual advertising company ZAO Begun for $140 million from UK-registered Rambler Media (many Russian firms now base themselves in the UK). Rambler owns 50.1 percent of Begun, so to secure the deal it is buying the remaining 49.9 percent stake from owner Bannatyne Limited and then selling the entire firm to Google. Rambler says it expects to net about $50 million from the deal which will finance its investments and potential acquisitions.

Simultaneously Google announced (fairly obviously) that Rambler will now use Google AdSense for Search and AdSense for Content services.

The contextual advertising market in Russia is worth $225 million billion but Google has, until recently, not made much indent into the market which has grown over two and a half times since 2006. Yandex, the Russian search engine and one of the biggest Russian Web portals online since 1997, could account for 64% of the market , accounting for $145 million. [UPDATE: MindShare Interaction recently predicted the Russian online ad market would hit $685 million this year].

From the press release:

Rambler Media Ltd. (“Rambler” or “the Company”), operating one of Russia’s most popular internet brands, announces that it has agreed to sell its contextual advertising company ZAO Begun (“Begun”) and related subsidiaries to Google. Rambler currently holds 50.1% of Begun. The transaction will consist of Rambler buying the remaining 49.9% stake in Begun from Bannatyne Limited, affiliated with the Finam group of companies, immediately after which Rambler will sell 100% of Begun to Google subject to certain approvals and conditions precedent for a total cash consideration of US$140 million, of which US$69.9 million is attributable to Bannatyne, with customary closing adjustments.

Rambler’s net gain from the disposal is expected to be approximately US$50 million after all direct costs associated with the transaction. Proceeds received in respect of the sale of its holdings in Begun will be retained by the Company for further investments and potential acquisitions in line with Rambler’s stated strategy. The Company’s net cash position after the completion of this sale is expected to reach US$100 million. The Company’s directors consider, having consulted with its nominated adviser, ING, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.

Google is the world’s most popular search engine. Begun is one of Russia’s leading search and contextual text based advertising services with local expertise, efficient sales systems and the number of its advertisers exceeds 40,000. Begun’s partner network includes over 143,000 Russian language sites.