Hands Сontrol Over VKontakte to Pavel Durov

May 29, 2012, Tue 09:10 AM  Internet  Business

The Group has clinched a deal to give its share of the VKontakte social network to Pavel Durov, the network's founder. The deal makes Durov the company's controlling shareholder. and the VKontakte social network have announced a range of bilateral agreements. The network's founder Pavel Durov will get the right to vote at shareholders' meetings of the company (owns Vkontakte network) of which 40% belong to The sides have not disclosed the detailed terms on control over VKontakte.

At the same time the partners have agreed on coordinating effort to tackle the problems that Russian internet companies face, as well as joint action in terms of the growing competition on the global scale. “VKontakte and remain independent regarding the companies management; they face a number of common problems that we intend to address jointly", Durov said. "It may lead to a rapid technological development of Russian companies and an improvement in Russians' experience in using the internet". Director General Dmitry Grishin said he was content that the companies had found a nice way of cooperation that will bring them profit in the long run, as well as profit to the Russian internet segment.

Durov owns 12% of shares. Thereby with the voting right granted by he can vote with his 52% of shares and become's controlling shareholder. 40% of the network's shares belong to Durov's classmate Vyacheslav Mirilashvili and his father, St. Petersburg entrepreneur Mikhail Mirilashvili (founder of Konti and Petrocommerce). The remaining 8% belong to VKontakte Development Director Lev Leviyev.

The Group, initially called DST became VKontakte shareholder in 2007 by acquiring 25% shares. It bought another 7,5% in autumn 2010 after a Group IPO. It spent all the money from the IPO for that deal. A stock option plan was made then to buy another 7,5% of VKontakte's shares and was implemented last summer at $111,7 million. Group purchased shares from shareholders according to their shares in the company. Initially, Mirilashvili owned 60% of shares but as a result of the deals their share reduced below the controlling level. Group intended to boost its share and bring together VKontake and the Odnoklassniki network. Dmitry Grishin put the idea forward a year ago; however it didn't get approval from Pavel Durov. This was followed by an open skirmish between the two.

In late April Group's controlling shareholder Alisher Usmanov said his company was giving its share in Vkontakte to Durov. He explained the move by his belief that founders play an important part in the success of internet projects and investors shouldn't interfere in management issues.

He referred to Facebook as an example whose minority shares were acquired by Group and DST fund group (main investor - Usmanov) under the condition that Mark Zuckerberg would continue its management. Usmanov calls this type of investment DST style investments.

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