Facebook Backer Alisher Usmanov Now Focused on China

(Bloomberg) — Billionaire Alisher Usmanov, who made
more than $1 billion investing in Facebook Inc., is now avoiding the U.S. and focusing on China, where the company holds stakes in online-commerce companies.

The valuations of U.S. technology companies are too high to
justify making new investments, Ivan Streshinskiy, chief
executive officer of Usmanov’s holding company USM Advisors LLC, said in an interview at Bloomberg’s headquarters in New York.
“We’re not investing in the U.S. at the moment,”
Streshinskiy said. “People got used to these huge multiples, often forgetting about the basic fundamentals of the business.”

The Uzbekistan-born Usmanov, 59, emerged as Russia’s
richest man this year following a shift from commodities to
technology. After backing successful Web services in Russia, Usmanov is seeking companies in other growth markets that can benefit from the spread of Internet-connected mobile devices.

“When you are doing even something small for China, it’s
really big on a global scale,” said Streshinskiy, 43. USM owns stakes in Alibaba Group Holding Ltd. and 360buy Jingdong Mall, two e-commerce companies that fit into Usmanov’s strategy of holding companies and profiting when they go public.

Usmanov, worth $17.2 billion, has invested in the companies
through Digital Sky Technologies, a fund run by Mail.ru Group Ltd. co-founder Yuri Milner. Usmanov has relied on Milner for his Internet investments since 2008.

Technology Holdings

Usmanov’s telecommunications, Internet and media assets
account for more than half of his fortune, according to
Bloomberg Billionaires Index. The rest comes from his iron-ore producer Metalloinvest, 4 percent of Russian miner OAO GMK
Norilsk Nickel, 30 percent of the Arsenal Football Club and
cash, including proceeds from the sale of Facebook shares.

The billionaire is particularly interested in e-commerce in
China, Streshinskiy said. Alibaba Group, the country’s largest e-commerce company, was valued at $40 billion in September, when an investment group led by China Investment Corp. paid $2
billion to acquire a 5.6 percent stake, a person familiar with the matter said at the time.

Earlier this year, Alibaba repurchased a 20 percent stake
in itself from Yahoo! Inc. ahead of a potential initial public offering. 360buy, meanwhile, said in June it won’t seek an IPO until 2013.

Facebook Deal

When Usmanov acquired a Facebook stake in 2009, his fund
persuaded founder Mark Zuckerberg to sell by giving up its
voting rights. Usmanov and Milner bought about 10 percent of Facebook when the company was valued at $6 billion to $10
billion, Usmanov told Russian TV channel Rossiya 24 this year. Usmanov sold about a third of his holdings in Facebook’s May IPO for about $1.4 billion, according to data compiled by Bloomberg.

After additional selling, Usmanov has about a third of his
Facebook investment left, and he can’t sell that stake until May because of a lockup restriction, Streshinskiy said.

Usmanov has been selling his stakes in Groupon Inc. and
Zynga Inc. as well. This year, Usmanov also gained control of Russia’s second-largest mobile-phone operator OAO MegaFon, which raised $1.7 billion in an IPO in London last month.

Asked whether Usmanov will sell the remainder of his
Facebook stock when the lockup expires, Streshinskiy said,
“We’ll see.” The shares have fallen 28 percent since the IPO amid concern that the company isn’t increasing sales from mobile advertising quickly enough.

“They have a brilliant team,” Streshinskiy said. “They
can have a bright future.”

To contact the reporters on this story:
Ilya Khrennikov in Moscow at
ikhrennikov@bloomberg.net ;
Sarah Frier in New York at
sfrier1@bloomberg.net

To contact the editors responsible for this story:
Kenneth Wong at
kwong11@bloomberg.net ;
Nick Turner at
nturner7@bloomberg.net

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