Elektrim fails to sign off on Internet portal
By : Roseanne Gerin
Tension flared between Elektrim and Poland.com last week after the Polish telecom and power group decided not to finalize a deal to purchase a majority stake in the portal by the Feb. 19 deadline.
The two firms, however, were confident they would resolve the issue when they resumed negotiations this week, especially as Elektrim could automatically obtain a majority stake in Poland.com if an outstanding loan is not repaid by March 30, sources involved in the matter said.
Elektrim said last week it did not sign a final deal with Poland.com to purchase 55% of its shares for $16.3 million by Feb. 19 because the portal failed to meet certain terms and conditions set forth in the preliminary agreement.
But Poland.com met all 11 conditions for the sale of its majority stake to Elektrim, according to Tomasz Czechowicz, the president of MCI Management. The Wroclaw-based venture capital group is one of the majority shareholders of Poland.com along with Vogel Publishing. He declined to provide further details, but added that he didn't know why Elektrim refused to seal the deal.
"We've done everything in our power from our side to close the deal," said Christopher Jasiak, the president of Poland.com and a partner and vice president of MCI Management. He declined to provide further details, citing a confidentiality clause in the original investment agreement.
"We are still extremely optimistic that we will be able to close the deal with Elektrim, (and) we are very positive about getting over these hurdles," Jasiak said, adding that the new negotiations could take a few days or a few weeks.
Elektrim did not finalize the deal due to "a combination of economic, financial and legal conditions" that Poland.com did not meet, said Ewa Bojar, Elektrim's spokeswoman. She refused to provide a further explanation.
A news release issued by Elektrim, however, said the company did not agree with a valuation of the rights to Poland.com that was conducted last November by the international audit agency PricewaterhouseCoopers. The appraisal valued the rights of Poland.com at $6.5 million, a change from an earlier estimate, Bojar said.
"The value evaluated by (PriceWaterhouseCoopers) was different from the value at the beginning of the negotiations, and it significantly changed the terms of the negotiations," Bojar said.
MCI said in a news release that Elektrim suspended the deal to buy the stake in Poland.com because of the valuation. But Bojar said the valuation was only one factor. While she did not elaborate on the other reasons, she said Elektrim would continue negotiations with Poland.com this week.
Elektrim's news release also stated that the company did not complete the transaction because it had documents showing that Poland.com did not have universal rights to Chip.pl, an online version of the information technology magazine owned by Vogel Publishing. The online magazine is part of Poland.com's collection of specialized Web sites.
Elektrim signed a letter of intent with Poland.com last September to buy the majority stake from the portal's shareholders. The company agreed to pay Poland.com $9.8 million in cash and $6.5 million in services to add the portal to its portfolio of online companies as part of its Internet strategy.
The original agreement also gave Elektrim the option of increasing its share capital in Poland.com to 80% for a maximum price of $30 million if the portal obtained 500,000 registered users by 2002.
Under the terms of the preliminary agreement, Elektrim could take over MCI's 51% stake in Poland.com if the portal fails to repay a zl. 15 million ($3.66 million) loan with interest by March 30. The loan is secured by MCI's 3.3 million shares in the portal.
"If we want progress with the negotiations, then MCI will pay it back," Bojar said. "But if not, Elektrim would automatically become the owner of Poland.com. (However), we believe all problems will be resolved."
Jasiak said the takeover possibility would be part of Poland.com's ongoing negotiations with Elektrim, but that the portal would repay the loan. He said Poland.com had not yet paid any money, and he refused to comment on the source of the funds to repay the loan.
"The procedures allowing Elektrim to take over the debt are much more involved than speculation (by the press) says," said Jasiak. "(Elektrim) has recourse, but in order to obtain it, it would need to file a legal injunction against (Poland.com)."
Czechowicz agreed that a possible takeover by Elektrim would not be immediate if Poland.com failed to repay its loan, adding that it would be "quite a complex legal situation."
Thomas Kolaja, the director of Elektrim Online, the Internet subsidiary of Elektrim, was not available for comment.
