Elektrim buys Poland.com stake
Telecom and power giant Elektrim has purchased a 55% stake of Poland.com, completing its four-month long quest to purchase an internet portal to add to its online retail business, Elektrim said last week.
The transaction is worth $16.3 million. Elektrim paid $9.8 million in cash and offered $6.5 million in in-kind contributions.
The acquisition completes Elektrim's investments in the retail sector within its internet strategy, said Thomas Kolaja, the director of Elektrim's online business. Elektrim plans to provide electronic-commerce services to users via Poland.com along with its previous acquisition EasyNet, a business-to-consumer virtual retailer that sells books, compact discs, photography, perfumes and apparel via its EMPiK web site (http:// www.empik.com). Elektrim expects to break even with its online business in 2002, he said.
According to the terms of the agreement, Elektrim has the option of increasing its stake to 80% for $30 million if the portal has 500,000 registered users by the end of 2001. The portal currently has about 50,000 registered users. Poland.com has 86 employees and carries $1.5 million in equity and $1.5 million in debt. The portal was launched in May by venture capital firm MCI Management and Vogel Publishing, which owns several information technology magazines. Poland.com said that it has about 10 million page views per month.
Tomasz Czechowicz, a managing partner at MCI Management, said that Poland.com had been looking for an investor because the portal needed to raise funds to be one of the major players in Poland's increasingly competitive cyberspace arena. He said he expected Poland.com to be one of the most popular portals by the end of 2000.
Poland.com said it would launch eight vertical portals, or web sites with specialized topics, by 2001. The portal already features information technology-related topics from Chip Online, based on the computer magazine owned by Vogel Publishing, as well as an international news service.
Elektrim had been holding acquisition talks with several portals in the past few months, among them Onet.pl, the most popular portal in Poland, owned by the information technology giant Optimus. But Kolaja said the company chose Poland.com because it wanted a portal that could offer the best potential for attracting new users instead of a more expensive leading portal. Although Poland.com is small, he said, it has the best staff to guarantee growth.
Industry analysts said that Elektrim bought Poland.com only because the price was right. "Elektrim did not want to buy an expensive portal such as Onet," said Michal Marczak, a telecoms analyst at BRE Bank Securities.
They also said that while Poland.com may serve Elektrim's purposes, the firm's cash injection would not propel the portal from near obscurity to one of the top-tier players.
"Elektrim bought the company in a start-up phase, so Poland.com has high risks and faces steep competition," said Pawel Szymanski, a technology, media and telecoms analyst at Schroder Salomon Smith Barney in London. "It is going to be difficult because Elektrim doesn't bring to the table any particular competitive strengths. It's not the leading internet service provider or a content provider. Elektrim can give money, but if there's no content, then the company will have to buy it."
