Empire instead of dividend: how the Russian market destroys shareholder value through M&A and capital construction projects

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The Russian equity market has traded cheaply in recent years: large companies are valued at 2–4x EV/EBITDA, and some below their own cash position. In such a setting the most profitable way to deploy capital is almost always the same – buy back and cancel one's own undervalued shares. Instead, free cash flow systematically goes into acquisitions at inflated multiples, into purchases of assets from controlling shareholders and into capital construction projects whose payback is confirmed neither by the numbers nor by the reporting. Below is a review of how this works, why Russian practice is poorer than the global one, and a catalogue of several dozen specific deals grouped by the mechanism of value destruction.

A methodological caveat: every figure was checked against primary sources – issuers' press releases, IFRS reporting, disclosure on e-disclosure and the exchange. Where a figure remains an estimate or is not confirmed by a primary document, this is stated directly in the text.

Part I. How it works in the world

The premium goes to the seller, the synergy stays in the presentation

Academic literature has recorded the same thing for decades: acquisitions on average destroy value for the acquirer's shareholders. The classic work by Moeller, Schlingemann and Stulz, "Wealth Destruction on a Massive Scale?" (Journal of Finance, 2005), showed that in 1998–2001 acquirer shareholders lost about 12 cents on every dollar spent – in total around $240bn around deal announcements. Acquirers' losses exceeded sellers' gains by $134bn: the deals destroyed value rather than merely redistributing it.

A more recent KPMG study, "All that glitters is not gold" (2024), on a sample of over 3,000 public-to-public deals above $100mn in 2012–2022: 57% of acquirers ultimately destroyed shareholder value. Before closing, deals gave on average +13% against the sector index, but over the two years after closing relative return fell by 7%. McKinsey states the mechanics more briefly: the control premium transfers 70–100% of expected synergies to the seller, leaving the buyer little or nothing.

The reasons have long been described. Roll (1986) – the hubris hypothesis: management overestimates its ability to run someone else's asset and overpays. Jensen (1986) – the agency problem of free cash flow: managers prefer to build an empire rather than return money to shareholders. Travlos (1987) – payment in shares is in itself a negative signal (management considers its shares overvalued). The market reaction to a buyback of own shares, by contrast, is consistently positive.

How the world protects minority shareholders in a related-party transaction

The most dangerous type of deal is when a company buys an asset from its own controlling shareholder or from a structure affiliated with it. Here the interests of the one who sets the price and the one who pays it through dilution are in direct conflict. Developed jurisdictions have built a multi-layered defence against this:

The common standard is a combination of an independent board committee, a fairness opinion on the price from an independent bank, a detailed circular with the valuation, and a vote of disinterested shareholders.

Part II. The Russian gap

Since 2017 consent to an interested-party transaction is given only on request

Russian regulation is fundamentally weaker. Major transactions under Federal Law 208 "On Joint-Stock Companies" are regulated by size (a 25% of assets threshold), not by conflict of interest. The institution of interested-party transactions was weakened after the 2017 reform (Federal Law 343): prior approval of such a transaction is no longer mandatory – the company merely notifies the board of directors 15 days in advance, and approval is obtained only if a board member or a shareholder with a stake of 1% or more demands it. The protection has turned from a "default" regime into an "on request" regime.

Russia has no mandatory fairness opinion institution. An independent appraiser under Article 77 is engaged only in limited cases. Disclosure of transactions (Bank of Russia Regulation 714-P) in practice often contains neither the price, nor the valuation method, nor the multiples, nor the appraiser's name – the fact of the deal and the parties are published, while its economics remain closed.

The mandatory offer is bypassed through deal structure

The key technique is buying at the holding level rather than the shares of the public subsidiary directly. When control of a public company passes through a parent layer, Article 84.2 on the mandatory offer to minority shareholders does not trigger. This is exactly how the SIBUR–TAIF deal was structured (minority holders of Nizhnekamskneftekhim and Kazanorgsintez received no offer) and Evraz's consolidation of Raspadskaya group. A separate mechanism for switching off protection is the form of an international public company: under Federal Law 290 Article 84.2 does not apply to international companies at all, which Etalon took advantage of (see below).

This is overlaid by the sanctions backdrop: since late 2022 the exit of "unfriendly" non-residents has taken place at a discount of at least 50%, which gave rise to a wave of deals in which insiders bought back assets at understated prices with minimal disclosure. A uniquely Russian overlay of a weak related-party regime and an administrative discount.

Part III. Catalogue of unprofitable M&A

3a. Buying from the controlling shareholder: to their own at a high price, the bill to the minority

Polyus – a buyback of 29.99% at a premium with borrowed money. The flagship case. In July–August 2023 Polyus, through its subsidiary Polyus Krasnoyarsk, bought back 40,802,741 shares (29.99% of capital) at RUB 14,200 – for a total of about RUB 579bn, financed mainly with bank debt. The price contained a premium of 32.56% to the market. Exactly the same stake (down to the share – 40,802,741 shares) had been sold a year earlier by Said Kerimov's structure to the Akropol group; according to the 2023 annual report, Akropol left the capital. That is, with borrowed money and at a premium the company bought back a block from a related structure, while a proportional tender never actually reached minority holders (applications were satisfied on a first-come basis within the limit). The direct effect per primary reporting: net debt rose from $2.3bn to $7.3bn, and net debt/EBITDA from 0.9 to 1.9 – on the eve of the capital-intensive Sukhoi Log construction.

Lenta – the purchase of Utkonos from Severgroup. In December 2021 – February 2022 Lenta bought the online retailer Utkonos from Alexei Mordashov's Severgroup for RUB 20bn. Mordashov at that time controlled about 78% of Lenta itself – that is, he sold his asset to a public company. Moreover the deal was financed by a Lenta additional issue by closed subscription in favour of the same Severgroup: the money moved inside Mordashov's perimeter. Utkonos was structurally loss-making (net loss of RUB 2.9bn for 2019 on revenue of RUB 8.8bn) and was bought at about 2.5x revenue with negative EBITDA. By 2025 the online business had been wound down, and all that remains of the asset is a brand transferred onto offline stores.

Etalon – a circular purchase of Business Real Estate from AFK Sistema. A textbook example of value extraction. In 2025–2026 Etalon (a public developer subsidiary in which Sistema held 48.8%) bought 100% of JSC Business Real Estate – a portfolio of 42 sites in Moscow and St Petersburg – from Sistema itself for RUB 14.1bn. Payment was through an additional issue (SPO) of RUB 18.4bn at RUB 46 per share, of which RUB 14.1bn immediately returned to Sistema for the asset. The SPO was almost entirely taken up by Sistema itself (377 of ~400 million new shares), raising its stake from 48.8% to about 70% and diluting minority holders by half. The scheme is closed: the holding puts money into the subsidiary, the subsidiary returns it to the holding for its own asset, and minority holders pay for this through dilution. A Vector Capital analyst called it "an extremely toxic practice" in Kommersant. This is not the first episode of this kind: back in 2019 Etalon bought the developer Lider-Invest from Sistema for about RUB 29.8bn – and at that very moment Sistema entered Etalon's own capital, buying about 25% from the family of founder Zarenkov at a premium. The same configuration: the seller of the asset simultaneously becomes a shareholder of the buyer. A historical detail on Business Real Estate: Sistema bought it from MGTS in 2014–2015 for RUB 6.3bn – half the price of the subsequent sale to Etalon. No mandatory offer followed: Etalon is an international public company, and Article 84.2 does not apply.

EMC – the purchase of Skandinavia, again from Mordashov. At the end of 2025 United Medical Group (EMC) announced the purchase of the St Petersburg clinic chain Skandinavia (Ava-Peter) from Alexei Mordashov's Severgroup. Payment is by additional issue by closed subscription: 32.8 million shares at RUB 766.2 (about RUB 25.1bn), which dilutes capital by 36.5% and makes Severgroup the owner of up to 26.7% of EMC. The placement price is 12–15% below the market. An important correction to the common version: the controlling shareholder of EMC at the time of the deal was not the founder Igor Shilov (he left in 2024) but management. Formally this is not a buyout from its own shareholder – but the deal creates a new 26.7% insider and dilutes minority holders at a price below market, without a disclosed independent valuation. For contrast: the parallel purchase of the Semeiny Doktor chain EMC carried out for cash, at 7.9x EV/EBITDA, from an external seller – an example of a normal deal.

T-Technologies – Rosbank and Tochka from Interros. In 2024 TCS (now T-Technologies) merged Rosbank through an additional issue: about 69 million new shares were issued, dilution of about 34.6%. The seller of Rosbank was Vladimir Potanin's Interros, which also received T shares and became the largest shareholder with a 41.4% stake. The thesis about slower growth in earnings per share is confirmed in part: absolute net profit after the deal grew even faster (+51% in 2024, +57% in 2025), but earnings per share lagged because of dilution (+40% against +51% profit), and return on equity structurally fell from ~33% to ~29% – Rosbank, with its half-as-high ROE, "diluted" the quality of capital. In 2026 T announced the purchase of the Tochka service – again from a structure linked to Interros (through the company Catalytic People, in which T owns 50.01% and Interros 49.99%), again through an additional issue, at an aggressive valuation of 3–4x equity.

SIBUR–TAIF – how minority margin moves up the structure. In 2021 SIBUR absorbed TAIF (which owned Nizhnekamskneftekhim and Kazanorgsintez): former TAIF shareholders, including the Shaimiev family, received about 15% of the combined SIBUR. There was no offer to minority holders of NKNK and KOS – the deal passed at the holding level. Afterwards the dividends of the subsidiaries collapsed: at NKNK from RUB 19.94 for 2018 and RUB 10.28 before the deal to RUB 1.49 for 2022 – with rising profit. The mechanism was recorded by the Tatarstan press: after consolidation NKNK sold SIBUR Holding 87% of its output (it had been 54%), KOS 92.5%, while profit concentrated in SIBUR's holding structures (about RUB 130bn). NKNK's dividend policy was rewritten on 22 May 2023 onto an opaque "normalised" base.

NMTP – the Primorsk port from a Transneft structure. In 2011 the Novorossiysk Commercial Sea Port bought 100% of the Primorsk Trade Port for $2.15bn from Cyprus-based Omirico, which was under the joint control of Transneft and Ziyavudin Magomedov – that is, from its own controlling beneficiaries. The deal was financed by a Sberbank loan of $1.95bn; the premium to NMTP's market price was estimated at about 80%. Seven years later, in 2018, "Transneft" bought out the Magomedovs' stake for $750mn – the very money that in 2022 was confiscated by a court as being of criminal origin.

M.Video – Eldorado and Media Markt from the same group. In 2018 M.Video bought Eldorado for RUB 45.5bn (a VTB loan of ~RUB 40bn) – both companies were controlled by the Safmar group of the Gutseriev family. In the same year the loss-making Russian Media Markt was bought for RUB 10.7bn, because of which the board refused dividends. The debt load went from a net cash position (2017) to 4.1x EBITDA and net debt of RUB 153bn (2024) with negative equity; the multi-round recapitalisation of 2024–2026 dilutes shareholders many times over, financed by structures related to the Gutseriev family.

PIK – Morton from the fund of its own majority holder. In 2016–2017 the country's largest developer bought the developer Morton from the Horus fund, linked to PIK's controlling shareholder Sergei Gordeev himself – a cash portion of about RUB 11.7bn, full value including debt of about RUB 42bn. This is a related-party transaction. The background of corporate secrecy is also telling: PIK did not publish IFRS reporting for 2022 and curtailed operating releases, restoring disclosure only partly in 2024; dividends have not been paid since 2021.

3b. Round-trip and value extraction inside the holding: bought dear, returned for free

MTS and Envision Group – "thirty times cheaper". The clearest intra-group round trip. In 2015 the public MTS bought the IT integrator Envision Group from AFK Sistema structures for RUB 11.2bn. In November 2020 MTS sold the same Envision back to Sistema for RUB 401mn – in RBC's wording, "thirty times cheaper than the acquisition". Both legs of the deal favoured the parent holding; the loss for MTS and its minority holders is about RUB 10.8bn. Separately, in 2018–2019 MTS bought MTS Bank from Sistema for a total of ~RUB 21bn, and in 2021 the management company Sistema Capital for RUB 3.5bn.

Globaltrans – buying out minorities cheaply with the company's own money. In 2024 Globaltrans, after moving to Abu Dhabi, carried out a delisting and a buyback of depositary receipts from minority holders at RUB 520. The offeror was GTI Finance LLC – a subsidiary of Globaltrans itself, so minority holders were bought out with the money of a company sitting on a net cash position of more than RUB 30bn. The price of RUB 520 corresponded to about 2.4 years of earnings. Five months after the delisting, in April 2025, the operating business (five subsidiaries) was sold to KSP Capital for $767mn – the strongest argument that minority holders were pushed out at an understated price.

MTS – dividends on debt for the parent holding. A separate mechanism of value transfer is not a purchase but a dividend policy dictated by the need of the controlling shareholder. AFK Sistema controls MTS and lives to a significant extent on its dividends. MTS pays about RUB 35 per share (around RUB 70bn a year) although free cash flow does not cover this: in 2025 FCF went negative by about RUB 38bn – that is, the payout is 100% financed by debt. Net debt (with leases) rose from ~RUB 408bn (2021) to ~RUB 710bn (2025); the company itself names capex, acquisitions and interest expense as the cause. The public subsidiary builds up debt in order to pump cash up to the holding.

LSR – a quasi-treasury stake in favour of management. Another form of value transfer bypassing minority holders. A stake of about 21.5% accumulated through a buyback by a subsidiary was in 2023 distributed to ten top managers (the company head Andrei Molchanov received 15%, equivalent to about RUB 12bn) – with no consideration from the recipients, at the expense of dilution of the economic stake of the other shareholders.

3c. Dilutive additional issues: those who did not take part in the closed subscription were diluted

Segezha – a rescue at the expense of minority holders. The debt load of AFK Sistema's pulp and paper subsidiary, inflated by a capex programme at the peak of the cycle (the Segezha West pulp mill, RUB 150–178bn, subsequently frozen), required a rescue. In summer 2025 an additional issue was carried out: 62.76 billion new shares at RUB 1.8, raising RUB 113bn by closed subscription in favour of Sistema and creditor banks. Share capital grew fivefold, minority holders were diluted by about 4.6 times, and Sistema's stake rose from 62% to 74%. A double destruction of value: first capex, then dilution.

VK – 59% dilution in favour of "its own" closed-end funds. In 2025 VK placed an additional issue of RUB 112bn: 345 million new shares at RUB 324.9, which came to about 59% of the post-issue capital. The entire issue was taken up by closed-end mutual funds whose unit holders are named as "key Russian shareholders"; none of the minority holders used the pre-emptive right. The money went to repay debt accumulated, among other things, by loss-making investments in VK Video and RuStore (2024 net loss of RUB 94.9bn).

Aeroflot – triple dilution in favour of the state. Per primary IFRS reporting: two additional issues (2020 – 1.33 billion shares at RUB 60 for RUB 80bn; 2022 – 1.53 billion shares at RUB 34.29 for RUB 52.5bn) increased the number of shares from 1.11 billion to 3.98 billion – 3.58 times. The state's stake rose from 51% to 74%, and the free float was diluted almost by half. Meanwhile the company's equity became negative back in 2020 and remains so despite RUB 132.5bn of state capital injected.

Positive analogues of dilution under M&A. Softline issued up to 76 million shares for acquisitions (about 20% of capital), which settled in the quasi-treasury stake of subsidiaries, and pays for purchases with them – while 2025 net profit was zeroed to RUB 14mn. MGKL went through an IPO, a conversion of preferred shares and the approval of convertible bonds, increasing its share count by 45% in 2.5 years. Positive Technologies institutionalised dilution as a policy – an additional issue of up to 15% of capital at each doubling of capitalisation (the market reaction was a fall of two-thirds from the peaks). Abrau-Durso placed 11.5 million shares by closed subscription in favour of a structure of the controlling shareholder Boris Titov for an undisclosed purpose.

3d. Opaque purchases: the dilution was disclosed, the valuation was not

VTB and Wildberries. In 2026 VTB is financing entry into the fintech assets of the combined RVB (Wildberries + Russ) through an additional issue with a limit of over RUB 547bn – up to 6.3 billion shares (about 49% of share capital) at RUB 87, dilution of about 36%. Meanwhile the valuation of the fintech stakes being acquired and of the capital of Wildberries Bank is not disclosed: the scale of dilution is declared, but not what exactly shareholders receive and at what price.

Magnit and Azbuka Vkusa. In 2025 Magnit bought 81.55% of Azbuka Vkusa for RUB 29.66bn. An honest caveat matters here: by multiples there is no overpayment – the implied EV/EBITDA of 3.5–3.8 is comparable to Magnit's own level. The problem is different: the seller is Bavero Group, with beneficiaries not disclosed in the unified state register of legal entities; the deal was accompanied by a refusal of dividends and a roughly twofold rise in debt (net debt/EBITDA from 1.5 to ~3), while Magnit's own treasury stake (about 29.65%) has not been cancelled – its cancellation would have been unconditionally more accretive.

Astra – "bargain purchases" that inflate paper profit. According to audited IFRS reporting, the Astra group systematically carries out acquisitions so that the consideration paid is set below the fair value of the target's net assets (assessed by an independent appraiser), and the difference is recognised as profit as a "gain from a bargain purchase". Total goodwill on the balance sheet is anomalously small (RUB 131mn) for a serial consolidator, while intangible assets are inflated: in the Platforma Bocman deal about RUB 1bn of intangibles was recognised against RUB 100 thousand of cash payment and half a billion of deferred consideration. In 2026 Astra bought a stake in the company AiB, one of whose co-owners is Astra's own former chief science officer – a potential conflict of interest. The counterparties and deal prices are hidden under Government Resolution No. 1102.

Tsifrovye Privychki. A holding assembled three months before the 2025 pre-IPO declared an M&A strategy of RUB 5bn, but did not disclose the names, amounts or sellers of the acquisitions (the number of deals ranges from two to eight in different materials). A red flag on earnings quality: 2025 net profit (RUB 1.15bn) exceeds EBITDA, which is arithmetically impossible from operations and points to a non-operating revaluation of intangible assets inflating "profit" ahead of the placement.

3e. Large historical purchases at the peak on debt: how champions are turned into hostages of banks

Rosneft and TNK-BP (2013) – a purchase for ~$55bn, of which $44.4bn in cash; net debt/EBITDA rose from 1.2 to 2.2. Expert estimates of the control premium are about $16bn, "which destroyed the synergy effect". In dollar terms the company years later is worth many times less than in the year of the deal.

Rostelecom and Tele2 (2013–2020) – a consolidation of the operator in which the valuation of Tele2 gave a premium to MTS of 41% (2019) on EV/EBITDA, recognised by analysts as unjustified; payment was 70% non-cash, including an additional issue in favour of VTB.

Mechel – a series of purchases at the peak of the coal cycle with credit leverage: the American Bluestone (2009, for $425mn, while about $4bn had been discussed at the 2008 peak; sold back in 2015 for a symbolic $5mn), Donetsk Electrometallurgical Plant (2011, $537mn, asset lost), the Elga construction. The result – a peak net debt of about $9bn and a decade as a hostage of creditor banks.

RUSAL and Nornickel (2008) – the purchase of a blocking stake for more than $13bn (loan plus RUSAL shares) at the very peak, six months before the crash, which nearly led to default.

OR Group (Obuv Rossii) – a retail roll-up with a pivot into microfinance at 200% per annum, ending in a default on all nine bond issues (about RUB 4.75bn) in 2022 and a delisting.

Petropavlovsk – a guarantee on a loan of the related IRC and a concentration on Gazprombank as lender and gold buyer led to the wiping out of shareholder equity under the 2022 sanctions (from a peak capitalisation of $3.3bn in 2010).

Samolet – a modern developer variant of the same pattern. The land bank was inflated from 15 million sq. m (2020) to 46.5 million sq. m (2023), mainly on debt; in 2024 the appraiser revalued it downward for the first time (to 41.5 million sq. m), and in 2025 the company reported a net loss – while land sales for the whole year were only RUB 6.2bn against a land bank worth hundreds of billions. The share fell from a peak of about RUB 5,800 (2021) to RUB 263 (2026), about 95%; dividends have not been paid since 2023.

QIWI – a series of fintech acquisitions with large write-offs: Rocketbank closed, Sovest sold at a loss, total impairments in 2023–2024 of about RUB 37bn, and before the NASDAQ delisting (from a peak of $37.65 in 2014 to $5.67 in 2024) the Russian business was sold to management at a discount three weeks before the revocation of Qiwi Bank's licence. An honest caveat for balance: not all deals failed – the exit from the Tochka project in 2021 brought a multiple above 2.5x with an internal rate of return above 35%. This is a counterexample showing that the problem is not M&A itself but discipline.

Part IV. Capital that does not pay back: EBITDA does not grow, while capex grows several times over

Inter RAO: investment has grown sixfold, profit stands still

According to the reporting, over 2021–2025 Inter RAO's EBITDA stagnates in the range of RUB 173–183bn – effectively minus 1% over four years while revenue grew by 43%. Capital expenditure over the same period grew about sixfold – from RUB 33bn to ~RUB 190bn. The investment programme is meanwhile "shifting right": what in the 2025 guidance was presented as fading after the peak has in 2026 been rewritten into larger amounts for subsequent years. The company does not name the EBITDA growth from the programme in figures, and it is not yet in the reporting. Against this background Inter RAO holds a cash position of RUB 450–520bn – more than its own capitalisation – that is, the market values the operating business at about zero, while the company invests this cheap money in machine-building assets at an expensive valuation (the Ural Turbine Works bought in 2024 for RUB 10.75bn with goodwill of RUB 3.3bn; the implied multiple is estimated at 10–18x EV/EBITDA – the exact figure cannot be confirmed, as the target's EBITDA is not disclosed).

Steelmakers: the IRR of buying back own shares is higher than the return on construction projects

Russian metallurgy is entering an investment peak against falling demand (2025 metal consumption of about 38 million tonnes, the lowest since 2011). Dividends are halted at all three: MMK – because of the 2025 loss, Severstal – six quarters in a row, NLMK – for 2024. The MMK case is the most telling: the company trades at about 2.4x EV/EBITDA with a net cash position, while its flagship project – coke oven battery No. 12 for ~RUB 90bn – is a replacement, not capacity-increasing. At such a valuation the return on buying back and cancelling own shares (roughly the inverse of EV/EBITDA – about 40%) is many times higher than the likely return on capex in stagnating demand. For Severstal the case is weaker (valuation of ~6x EV/EBITDA, pelletising gives raw material security), for NLMK it is in between.

Nornickel: a copper smelter to China while refusing dividends

In April 2024 Vladimir Potanin announced the relocation of the Copper Plant's smelting capacity from Norilsk to China in partnership with a Chinese company. There is no officially confirmed project – only an interview; capital expenditure is not disclosed (expert estimate – $0.5–1bn). By early 2026 the project is stalling: the Chinese partner left after a change of management, and China has a surplus of copper capacity. The criticism (including from RUSAL) is the export of value added and by-product metals, geopolitical dependence, and a risk to jobs in Norilsk. In parallel Nornickel for the fourth year is not paying dividends – for 2025 the refusal was confirmed despite positive adjusted FCF of $1.48bn, with the wording of a priority on reducing debt.

Megaprojects with unclear payback

Gazprom, Power of Siberia 2: the document signed in September 2025 is a memorandum, not a contract; the gas price for China and the investment decision have not been announced, while the company has not paid dividends for three years and showed its first loss since 1999 (RUB 629bn for 2023). RusHydro: the Far East investment programme of over RUB 1trn at regulated tariffs yields negative FCF, a dividend moratorium until 2029 and a risk of covenant breach. SIBUR (EP-600, Amur GCC), Polyus (Sukhoi Log, the estimate rose from $2.3bn to ~$6bn) and fertiliser producers (Acron, PhosAgro) – large capex with missed deadlines, undisclosed payback and squeezed dividends.

Part V. The extreme case: when someone else's purchase becomes a sentence for the share

A separate layer is deals where the risk materialises not through a multiple but through law and the state.

Rusagro. An aggressive roll-up (NMZhK, Agro-Belogorye, Solnechnye Produkty) quadrupled revenue, but EBITDA has stagnated since 2021. The "bargain" purchase of Solnechnye Produkty in 2018 through buying distressed debt and a controlled bankruptcy became the basis of a criminal case: in March 2025 the founder Vadim Moshkovich was arrested, and in May 2026 about 68% of the company was turned over to the state. The forensic lesson: buying through someone else's bankruptcy carried a deferred legal risk not reflected in the multiples.

UGC. The company went public under the slogan of reducing debt, carrying on its balance sheet guarantees for structures of the founder's family. After Rostekhnadzor halted half of production and a stake was sold to Gazprombank, Konstantin Strukov's stake (about 67%) was in July 2025 turned over to the state on an anti-corruption ground. More than 220 thousand minority holders suffered a loss from the collapse and found themselves in legal uncertainty over the offer.

Polymetal. The sale of the Russian assets to the Mangazeya structure in 2024 took place at 3.6x EV/EBITDA against a historical ~8x – a discount of 34–54%, which the CEO directly called an "unfair price". Russian minority holders on the Moscow Exchange were left without the underlying asset and, because of sanctions on depositary infrastructure, without a normal route into the Kazakh listing.

Highland Gold, Lenzoloto, Raspadskaya. A squeeze-out of minority holders (Highland Gold, delisting by Sviblov), the transfer of assets to a parent structure leaving a "shell" (Lenzoloto), a freeze of dividends because of a sanctioned foreign majority holder (Raspadskaya, where Evraz owns 93%).

Part VI. Discipline as the exception: what distinguishes good allocation

Value destruction is not universal – there are companies that consistently return capital or buy cheaply.

Cancellation turns a buyback into value. LUKOIL is the benchmark: according to the company's website, in 2018–2020 more than 157 million shares were actually cancelled (not left "hanging" in quasi-treasury but annulled), and in August 2025 the cancellation of up to another 76 million was approved – when calculating dividend per share these shares are deducted, mechanically raising the payout. Plus discipline: almost no large destructive M&A, a dividend of at least 100% of adjusted FCF. (An important caveat: the 2023 plan to buy back up to 25% of shares from non-residents at a discount was not implemented – in October 2024 the Ministry of Finance publicly stated there were no such plans.) Bank Saint Petersburg – a buyback with cancellation at a return on equity of 27%, one of the best TSRs in the sector.

A cheap purchase creates value at entry. Sovcombank bought Home Bank for less than one times equity, recognising a bargain purchase gain of RUB 19bn – direct accounting evidence of a purchase below net asset value, from an unrelated party. Mother and Child buys clinics for cash at 0.9–1.3x revenue (below its own multiple), without dilution. Renaissance Insurance recognised negative goodwill of RUB 1.7bn on the purchase of Raiffeisen Life. HeadHunter instead of acquisitions paid a special dividend of about RUB 40bn.

Two traps for balance. The first is "dead cash": Surgutneftegas, Unipro and Inter RAO do not destroy value through acquisitions, but nor do they return the accumulated amount to the holder of ordinary shares – an idle cash position also weighs on the return on capital. "Not spending on M&A" is a necessary but not sufficient condition. The second is "false dilution": the technical bonus issue of NovaBev (a 1-for-8 split from own funds) looked like an 80% collapse but did not destroy value – it is important not to confuse a split with a dilutive additional issue.

Part VII. Conclusion: if shares had been cancelled, value would have grown faster

The overall picture is distinct. The dominant pattern of the Russian market is not the creation but the transfer of value: from minority holders of public companies to controlling shareholders (through related-party purchases and dilutive additional issues), or its direct destruction (through purchases at the peak on debt and construction projects that do not earn back the cost of capital). The protective mechanisms standard for developed jurisdictions – an independent committee, a fairness opinion, a vote of disinterested shareholders – are in Russia either absent or, since 2017, switched into an "on request" regime, and deal structuring regularly allows even the mandatory offer to be bypassed.

The counterfactual is simple and in most of the cases reviewed works in one direction. A company trading at 2–4x EV/EBITDA, by buying back and cancelling its own shares, gets a return on each rouble invested many times higher than by buying someone else's asset at 6–18x EV/EBITDA or by building with an unconfirmed payback. The difference between LUKOIL and Bank Saint Petersburg on the one hand, and Segezha, VK, Aeroflot or Inter RAO on the other, is not a difference of industries but a difference of capital allocation discipline.

What must change: a mandatory independent valuation and a vote of disinterested shareholders on related-party transactions, disclosure of the price and multiple of each material deal – and, on the investor's side, taking the capital allocation history into account as a separate factor of issuer quality.

Appendix: where the facts corrected common versions

• VTB and Otkritie (2022) – not an overpayment but a bargain purchase with a gain of about RUB 165bn (0.67x equity); VTB's problem case historically is Bank of Moscow.
• "Magnit overpaid for Azbuka" – by multiple there is no overpayment; the problem is the seller's opacity and the refusal of dividends. "Inter RAO at 15x EV/EBITDA" – plausible as an order of magnitude, but the target's EBITDA is not disclosed.
• EMC and Skandinavia – the seller is Mordashov, not the founder Shilov (he left in 2024). Raspadskaya and Yuzhkuzbassugol (2020) – a cash deal, without issuing new shares.
• Detsky Mir, Ozon, Element – by the time of the events Sistema had already exited; this is not value extraction by the holding. LUKOIL's buyback from non-residents (2023) – a plan disavowed by the Ministry of Finance.