Russian mobile major Veon (former Vimpelcom) is in talks to acquire OTM adtech company in Russia, Vedomosti daily reported citing unnamed sources. Reportedly, Veon has already filed for anti-trust approval and is considering acquiring more than 51% of OTM for an undisclosed amount.

OTM was created in 2010, offers services of programmatic ad buying, and owns Videonow and VideoTarget digital ad networks (the latter may not be part of the deal). 

Vedomosti estimates revenue of the entities that are reportedly part of the deal at RUB0.54bn ($7.35mn) in 2019 (based on SPARK-Interfax data) and the total revenue of OTM, including entities not part of the deal, at RUB0.9bn.

"The deal would be in line with Veon’s strategy – adtech is a focus area in non-telecom services," BCS Global Markets commented on March 17, noting that the trend to limit third-party cookies in Russia (as well as worldwide), which the M&A target likely employs, may help Veon get better terms. The analysts affirmed Hold rating on Veon shares.

In a separate report the mobile major said that Alex Kazbegi will step down from his position as Veon’s chief strategy officer, with his replacement yet to be announced. 

As a reminder, Mr. Kazbegi has served in this role since February 2019. Prior to joining Veon, he was head of research at Renaissance Capital, where he had worked as an equity analyst since 2002, Sova Capital wrote on March 17.

Veon also announced that it had hired former BoD member Alexander Pertsovsky in January to provide “certain consulting and advisory services relating to strategic transactions in Russia”. Before joining Veon’s key shareholder LetterOne in 2018, Mr. Pertsovsky was Bank of America Merrill Lynch’s country executive for Russia and the CIS. 

"We see the news as mixed for Veon," Sova Capital analysts argue, warning that the market could take a cautious approach to Kazbegi’s departure. On the other hand, hiring Pertsovsky could in theory mean some prospective value accretive transactions in Russia. 

For instance, the company highlighted with its 4Q20 results that it has taken preparatory steps towards crystallising the value of its tower infrastructure and that it will focus on various opportunities, ranging from improving efficiency to monetising infrastructure assets, Sova reminds.

"It is also worth remembering that Russian news outlet RBC reported in September 2020 that VEON could be interested in buying Megogo, one of Russia’s largest online OTT/VOD services," the analysts wrote. Sova Capital maintained a Hold rating on Veon shares, that trade at estimated 2021 Enterprise Value/EBITDA of 3.6x. 

As reported by bne InelliNews, in 4Q20 Veon saw improvement in results in Russia, but provided no clear guidance on the 2021 dividend.