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Former Uber CEO Travis Kalanick and his No. 2 Emil Michael were involved in Yandex deal

  • The two technology companies announced an agreement on Thursday to combine their ride-hailing services into a joint entity in Russia, Armenia, Azerbaijan, Belarus, Georgia and Kazakhstan.
  • The deal will relieve pressure from Yandex shareholders.
  • The deal team changed overtime, both Kalanick and Michael were involved in the deal.

Ousted Uber officials Travis Kalanick and Emil Michael were involved in making a mega-deal with the "Google of Russia" on ride-hailing, executives told CNBC.

The two companies announced an agreement on Thursday to combine their ride-hailing services into a joint entity in Russia, Armenia, Azerbaijan, Belarus, Georgia and Kazakhstan. The combined company, controlled by Russia-based Yandex, will be valued at $3.725 billion, with both Uber and Yandex investing hundreds of millions of dollars.

Once it was clear how big the ride-hailing industry could become — both in how much capital was needed, and how much money it could make — Yandex decided it needed to separate its ride-hailing business from its core search business, according to Tigran Khudaverdyan, CEO of the new combined company, and Greg Abovsky, Yandex's chief financial officer.

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The deal will relieve pressure from Yandex shareholders, who were concerned about squeezed margins, big losses and heavy investments in the ride-hailing business, Khudaverdyan and Abovsky said. Four members from Yandex will be on the board, with three seats for Uber.

The executives of the Russian company said that while Uber has a deep bench of talented people, and the deal team changed over time, both Kalanick and Michael were involved. Uber did not immediately respond to a request for comment.

Kalanick and Michael both recently left operational roles at Uber amid a series of scandals, including a human resources overhaul, sexual harassment allegations, and a trade secret dispute. Kalanick still serves on the board of directors and owns a stake in Uber.

But Yandex was positively surprised by Uber, Khudaverdyan and Abovsky said.

Growth opportunities for the new company include integration with Yandex's ecosystem and Uber's food delivery program. The new company could even go public one day, Khudaverdyan and Abovsky said.

Still, while the deal eases competition for both Uber and Yandex short term, the joint venture could eventually expand to new markets, Khudaverdyan and Abovsky said, putting Yandex and Uber in competition once again.

— Reporting by CNBC's Deirdre Bosa. Reuters contributed to this report.