A potentially giant deal is being currently reviewed by Russian regulators. According to sources that have spoken to Forbes, Avito.ru, the leading horizontal marketplace in Russia, has made a bid to purchase the No. 1 real estate vertical in the country — Cian.ru.
The Russian Federal Antimonopoly Service (FAS) has allegedly been reviewing the deal for several months. The regulator is currently in the process of finalizing research and interviews to determine whether the deal will be disruptive to the local competitive environment.
As the transaction is already being reviewed by the regulator, Cian.ru has thus accepted the bid from Avito.ru, which is owned by international marketplace giant Prosus. No information has been disclosed regarding the size of the bid.
Cian had been planning an IPO in the U.S. in 2022 with an expected valuation of around $1 billion U.S., but the bid from Avito likely proved more appealing to its primary shareholders — Russia-based private equity fund Elbrus Capital and publicly listed investment banking giant Goldman Sachs. Company founder Dmitry Demin and company CEO Maxim Melnikov also hold shares in the business.
According to Russia-based business publication RBC, Avito.ru possesses around 40% of the total real estate listings in Russia, with Cian.ru holding a 20% share. However, these measurements are likely unreliable, with many property listings on Avito duplicates and unverified. By revenue, Cian.ru is almost certainly the dominant real estate marketplace business in Russia, with an estimated $40-50 million U.S. in revenue annually.
What’s Avito’s strategy for the acquisition?
Avito has long been focusing on the real estate category, one of the more resilient segments in Russia compared to jobs and cars. The company launched its own real estate vertical Domofond.ru in Russia in 2014, but the vertical has struggled to gain significant traction, recently focusing more on new builds. It’s now a Top 5 vertical by total monthly visits.
The biggest disruption to the real estate market came with the entry of DomClick in 2017, when the largest bank in Russia — SberBank — launched its own real estate marketplace. Listings are entirely free on DomClick and the vertical makes its revenue from home financing and various add-on services for agents and private users. It’s now the No. 3 real estate marketplace by monthly visits, with around 30 million on average according to SimilarWeb, behind Cian and Avito.
The acquisition of Cian would thus help Avito consolidate a genuinely strong position in the real estate market and push forward its strategy to build out a more transactions-led business that can compete with DomClick’s powerful current offering.
The key question now is whether the Russian regulator would be willing to green-light the transaction. Considering the sometimes xenophobic stance of the Russian authorities, the regulator has clearly been careful in making a decision on the deal, and appears to be genuinely working toward a fair solution.
Cian.ru sees around 40 million total monthly visits on average, according to SimilarWeb. Avito.ru is close to breaking 300 million in total monthly visits for the first time, reaching 297 million in August.
Revenues at Avito.ru increased by 20% to $415 million U.S. in FY2020, and its trading margins remained strong at 40%. It’s the most impressive business in the Prosus classifieds portfolio and one of the few large, successful businesses in Russia owned by a foreign company. Avito recently announced it was starting to move to a full “marketplace” model.