The proposed megamerger between Russia’s leading technology company Yandex and fast-growing challenger bank Tinkoff has been scrapped.

In an announcement to the London Stock Exchange — where Tinkoff’s holding company TCS is listed — the bank said negotiations between the two sides had been “terminated, effective immediately.”

Yandex and Tinkoff previously announced they had reached an “agreement in principle” for the tech giant to take over the bank in a $5.5 billion cash-and-shares deal.

Shares in both companies plunged Friday morning. Tinkoff lost more than 6% while Yandex dropped back by almost 4%.

Signs that the deal was in trouble emerged earlier this week, as The Bell reported Tinkoff’s billionaire owner Oleg Tinkov had approached half a dozen outfits about buying the upstart lender — which posted around $500 million in profits last year — over the last 18 months. The latest potential suitor was rumored to be MTS, a telecoms firm which also has a small bank of its own, MTS Bank.

In a separate statement issued to the media, Tinkoff dismissed the idea that it would be sold to another company. “We are not negotiating with anybody. Tinkoff will continue to develop independently,” it said.

Forbes Russia reported that the main sticking point in the negotiations was over the role that Tinkov — who is currently being treated for acute leukemia in London and battling U.S. extradition charges over an alleged $1 billion in unpaid taxes — would play in the bank once it was integrated with Yandex. The outspoken billionaire wanted to stay involved and have an active role in the bank’s development — an idea which Yandex was opposed to, the magazine reported.

Yandex hinted at disagreements with Tinkov, the bank’s controlling shareholder, in its own stock market announcement Friday.

“Yandex regrets to confirm that it has not been able to agree definitive transaction terms with the core shareholders of Tinkoff, and accordingly that the parties have mutually agreed to terminate discussions,” the company said.

The proposed tie-up had been warmly cheered by market analysts, who count both Yandex and Tinkoff as among the most successful Russian startups of the last two decades. Yandex ended a decade-long partnership with state-owned bank Sberbank in the summer. That divorce paved the way for them to branch out into the financial services sector — the missing piece of Yandex’s sprawling empire which stretches from online advertising and e-commerce to driverless cars, taxis and food delivery.

Via The Moscow Times

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