Russian Companies to Acquire ICQ

Apr. 7 – “ICQ might become Russian,” Russian newspaper Vedomosti proclaimed yesterday.

Parent company AOL has collected binding offers filed by Russian Internet investment groups Digital Sky Technologies (DST) and Prof-Media to purchase ICQ’s instant-messaging service and also from Chinese company Tencent.

According to multiple reports DST started the early stages of negotiations to acquire ICQ for between US$200 million and US$250 million last December while Prof-Media offered about US$120 million for a 100 percent stake. Several other Russian companies, mobile operators and country largest internet company Yandex were invited to submit offers for ICQ but they declined.

AOL CEO Tim Armstrong said at the UBS Global Media and Communications Conference that he wants to sell assets that don’t fit in with AOL’s new content, communications and advertising focus. He intends to refocus AOL on becoming a top producer of digital news, information, entertainment and other content, while maintaining AOL’s traditional presence in e-mail and instant messaging.

Acquired from Israeli parent company Mirabilis in 1998 for $287 million (plus earn outs up to $120 million), ICQ was among the pioneers of real-time internet communications. The service’s main earnings come from banners and contextual advertising in search results. ICQ has been eclipsed by other instant-messaging services in the United States, but it remains popular overseas. It has 42 million users globally and according to ICQ managing director Eliav Moshe, Russia accounted for 44 percent of the whole audience with about 18.5 million users a month.

The Russian media feel that as long as ICQ is the leading IM service in Russia, credited with almost half of the market, it makes sense to hand it to DST, which already controls the second-leading IM service through its majority stake of Russia’s largest Web site Mail.ru.

London and Moscow based Internet investment group Digital Sky Technologies (DST) originated in Russian speaking world and is prominent in Russia, Ukraine, Kazakhstan, Georgia and Armenia. It was founded in 2005 by Russian businessmen and Internet investors Yuri Milner and Gregory Finger. The company has investments in Mail.ru, Forticom, and vKontakte. In May 2009, the company bought 1.96 percent of Facebook for US$200 million, stating that they prefer to buy small stakes in big companies rather than a big stake in a small company.

DST also holds large stakes in companies and is currently in the middle of combining Astrum online gaming with Mail.ru.