The company announced on Thursday that it has reached an agreement with German publishing giant Axel Springer, which owns the renowned Bild and Welt dailies, for TL 356.7 million.
The announcements by both companies stated that Doğan Holding must first inject TL 198 million in capital to Doğan Yayın, where it has a 74.5 percent stake, and then Axel Springer will acquire 29 percent of Doğan Yayın.
Doğan Yayın had told Reuters last week that it was very optimistic about Nov. 24 talks with Turkish authorities and on reaching a deal concerning its TL 4.8 billion tax fine, which has threatened the future of the company. The group has accused the Turkish government of using tax fines to suppress the media, while the government denies that the fines are politically motivated. The tax auditors of the Finance Ministry found irregularities in the accounts of Doğan Yayın.
Springer said its latest deal is conditional on the successful resolution of the tax issue and of regulatory proceedings brought against Doğan Yayın unit Doğan TV by the Turkish broadcasting authority, the Radio and Television Supreme Council (RTÜK). “Providing the tax proceedings and the regulatory proceedings ... are resolved successfully, Axel Springer and Doğan Yayın will continue to strengthen their strategic partnership,” the German company said.
Doğan Yayın shares rose as much as 11 percent after the news on Thursday and closed 3.8 percent higher. Doğan Holding rose 1 percent. During Friday trading, however, the shares remained virtually flat. “It is positive for Doğan Holding because it means an inflow of money, so the shares responded positively,” said Tuncay Turşucu, head of research at Meksa Invest in İstanbul. Shares in Axel Springer, on the other hand, fell 3.4 percent on Thursday.
The deal, which replaces an agreement in November 2008 under which Axel Springer was to buy a 9.1 percent stake in Doğan Yayın, comes after Doğan said last month it was seeking new partners or the sale of stakes in subsidiaries.
Under the agreement the Doğan Yayın board of directors will be made up of five members from Doğan Holding, three from Axel Springer and two others representing the Doğan family and Aydın Doğan Foundation. Axel Springer will also have one member on the administration committee that will be formed after the deal is completed and which will include five members.
Doğan Yayın CFO Soner Gedik said last week during an interview with Reuters that any asset sales would not be connected to its tax dispute and would be aimed at enhancing its strategic partnerships.
The price would be subject to adjustment based on Doğan Yayın’s stock performance in the last three months prior to March 31, 2016, when the final purchase price will be payable. Analysts find the deal confusing since Axel Springer is due to pay the amount seven years after both sides shake hands. The deal needs approval from both RTÜK and the Competition Board for completion.
Doğan Yayın will also implement a capital increase of 385 million euros at its Doğan TV unit, which will significantly reduce the company’s debt and dilute Axel Springer’s stake in that unit to 19.9 percent from the current 25 percent.
Turkey’s state media watchdog last month gave Doğan three months to comply with a law limiting foreign ownership of Turkish broadcasters to 25 percent.
Doğan strangled by tax fines
Doğan Yayın sustained a blow with a tax fine of TL 693 million by tax authorities in February over the sale of a minority stake in subsidiary Doğan TV Holding to Axel Springer. Failing to provide proper collateral in the given time frame, tax authorities in March froze Dogan’s bank accounts in a legal wrangle over the tax dispute. After four months, some of the assets were released, while Doğan TV Holding shares held by the tax office under a precautionary attachment rose to 53.9 percent.
The worst came in September, when tax inspectors fined firms controlled by Doğan TL 3.76 billion, twice the level of tax arrears, which officials assessed at TL 1.88 billion after examining the accounts for 2005-07. The amount rose to TL 4.8 billion including interest. The tax office requested that Doğan Holding units Doğan TV Holding, D Yapim Reklamcılık, Doğan Produksiyon and Alp Görsel Communications put up a guarantee equal to the total fine of TL 4.8 billion, and Doğan reacted by launching a court challenge to the guarantee requirement. In mid-October, Doğan Yayın said it had provided collateral in the form of shares in Doğan units and 44 properties to the tax office to cover the fine. The tax office then imposed a preliminary injunction on the sale of shares in three of Doğan’s units, and one day after this, Doğan Yayın said the tax office had rejected the guarantees. On Oct. 30, Doğan said the company and some units received an invitation from the Finance Ministry for talks on settling the tax fines. On Nov. 4, Doğan Yayın said it would have talks with the Finance Ministry on Nov. 24 to discuss a possible settlement.
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