Fight erupts over control of RMF FM<BR>
RMF President Stanis-aw Tyczyński applied last week to the National Radio and Television Council (KRRiTV) for permission to allow Broker FM, of which he owns 50%, to take a majority position in RMF.
The application follows Broker's acquisition of 49% of RMF's voting rights and 51% of its shares in January.
But that share purchase, along with the request to the KRRiTV, has led to a fierce battle for control among directors of a charitable foundation originally set up to run the Krakow-based station.
On one side are Tyczyński and a handful of RMF managers who are also involved with Broker, which handles ad sales for the station.
Opposing him, and the sale of a majority RMF stake, are some of Tyczyński's fellow directors of Krakowska Fundacja Komunikacji Spo-ecznej (KFKS), a foundation established to run the radio station when it started in 1990. These directors, who contend that the share sale to Broker violates KFKS's charter, include Edward Nowak, president of publicly traded Sobies-aw Zasada Centrum and a former deputy industry minister, and Stanis-aw Handzlik, chairman of Krakow's city board.
Nowak and Handzlik, along with two other members of KFKS's eight-member board, three weeks ago filed a complaint in Krakow's Registration Court in an attempt to block the transfer of RMF shares to Broker.
"It was a clear case of breaking the law," Nowak alleged, adding that Tyczyński violated foundation rules when he approved the sale as KFKS's chairman to a company he controls.
Tyczyński and other RMF managers involved in the sale maintain, however, that the deal was in accordance with the foundation's charter. And Tyczyński applied last week to the National Radio and Television Council (KRRiTV) for permission to increase Broker's holding in the station to a majority position.
The KRRiTV, which must approve any change in majority control of a shareholding stake in a broadcaster, is expected to rule on the request by the end of the month.
Tyczyński, a founder of the station who does not give press interviews, was unavailable for comment to this article.
Marek Dworak, RMF's chief financial officer and the president of Broker, argued that the station's ownership structure needed to be changed if it was to operate on a sounder commercial footing.
"This way the capital structure of the station is much clearer, not to mention that it was pretty difficult to effectively manage the station in a foundation that could never meet with a quorum," Dworak said. The station "would not have remained strong if it had been controlled by the foundation."
He added that the foundation structure could also have limited the station's future growth. If RMF needs to go to outside investors for future financing, it will need a more commercial structure, he said.
But Tyczyński's opponents argued that the share transfer amounted to a sweetheart deal that allowed Broker to gain control of RMF on the cheap.
"It's all about money and in this case it's big money we're talking about," Nowak said.
Broker paid about z-. 25 million ($6.6 million) for its 51% stake in RMF, according to documents filed with the KRRiTV. This gives the company a valuation of about z-. 50 million ($13.5 million). The valuation is roughly in line with the z-. 20 million ($5.2 million) KFKS paid to buy back 40% of RMF in December from Krakow-based Bank Przemys-owo-Handlowy (BPH).
However, on a price-to-sales basis, Broker's valuation is a multiple of just 0.4 times 1998 sales. According to data from market research firm O¶rodek Badania Opinii Publicznej (OBOP), RMF had gross 1998 sales of z-. 130 million ($34.2 million).
In contrast, Modular Investment, a subsidiary of an Irish radio and telecom company, paid 3.75 times annual sales when it purchased a 33% stake in supraregional network WaWa in 1997. WaWa had national listener share of just 1.3% in January, according to OBOP.
But RMF is the country's largest radio station and in January 1999 it had 36.3% nationwide listener share, ahead of competitor Radio Zet with 31.7%, according to OBOP.
At issue between Tyczyński and his fellow KFKS directors is whether he acted in accordance with the foundation's charter when he sold the stake in RMF to Broker.
According to the charter, changes to the radio station's shareholding structure must be approved by the KFKS chairman and at least one other director.
The sale to Broker was approved by Tyczyński, who is KFKS's chairman, and the foundation's deputy chairman, Marek Jod-owski. During the transaction, the two effectively brokered a deal while sitting at both sides of the table.
In addition to their roles in KFKS, Tyczyński is chairman of Broker and owns 50% of the company. Jod-owski owns 10% of Broker. Dworak and Roman Porwisz, who is RMF counsel, also each own 5% of Broker. The remainder of the company's shares are held by other individual investors.
Broker, which was created as a subsidiary of RMF, handles the radio station's ad sales.
But Nowak said that while the Broker sale may appear to be within the letter of the charter, it is not in accordance with its spirit. He argued the approval of only two individuals was only meant to relate to outside financing deals, not a sale of the station.
Other KFKS members said the moves are part of a continuing push by Tyczyński and his allies to bypass the foundation.
"There has not been a board meeting for the last few years, and we would get to know about decisions regarding the foundation a few months after they happened," said Stanis-aw Handzlik, who is one of two KFKS deputy chairmen. "We have no control whatsoever over the way the money is spent, and this is a very profitable radio station that is still owned by the foundation."
That ownership will change, though, if Tyczyński is successful at the KRRiTV. His request to the media watchdog calls for a change to the station's broadcasting license, which says that KFKS must hold a majority of the voting rights of RMF. This is a move Nowak and others will oppose, but it is not clear the KRRiTV would step in unless they could prove that a law was violated.
"It is a clear move for more control of the station, which in itself does not have to be bad, it's just weird when one person buys shares from himself or herself," said Andrzej Zarzbski, a KRRiTV member. "We just have to make sure that such a change would assure proper operations of the radio station, and that no law has been violated so far."
The application follows Broker's acquisition of 49% of RMF's voting rights and 51% of its shares in January.
But that share purchase, along with the request to the KRRiTV, has led to a fierce battle for control among directors of a charitable foundation originally set up to run the Krakow-based station.
On one side are Tyczyński and a handful of RMF managers who are also involved with Broker, which handles ad sales for the station.
Opposing him, and the sale of a majority RMF stake, are some of Tyczyński's fellow directors of Krakowska Fundacja Komunikacji Spo-ecznej (KFKS), a foundation established to run the radio station when it started in 1990. These directors, who contend that the share sale to Broker violates KFKS's charter, include Edward Nowak, president of publicly traded Sobies-aw Zasada Centrum and a former deputy industry minister, and Stanis-aw Handzlik, chairman of Krakow's city board.
Nowak and Handzlik, along with two other members of KFKS's eight-member board, three weeks ago filed a complaint in Krakow's Registration Court in an attempt to block the transfer of RMF shares to Broker.
"It was a clear case of breaking the law," Nowak alleged, adding that Tyczyński violated foundation rules when he approved the sale as KFKS's chairman to a company he controls.
Tyczyński and other RMF managers involved in the sale maintain, however, that the deal was in accordance with the foundation's charter. And Tyczyński applied last week to the National Radio and Television Council (KRRiTV) for permission to increase Broker's holding in the station to a majority position.
The KRRiTV, which must approve any change in majority control of a shareholding stake in a broadcaster, is expected to rule on the request by the end of the month.
Tyczyński, a founder of the station who does not give press interviews, was unavailable for comment to this article.
Marek Dworak, RMF's chief financial officer and the president of Broker, argued that the station's ownership structure needed to be changed if it was to operate on a sounder commercial footing.
"This way the capital structure of the station is much clearer, not to mention that it was pretty difficult to effectively manage the station in a foundation that could never meet with a quorum," Dworak said. The station "would not have remained strong if it had been controlled by the foundation."
He added that the foundation structure could also have limited the station's future growth. If RMF needs to go to outside investors for future financing, it will need a more commercial structure, he said.
But Tyczyński's opponents argued that the share transfer amounted to a sweetheart deal that allowed Broker to gain control of RMF on the cheap.
"It's all about money and in this case it's big money we're talking about," Nowak said.
Broker paid about z-. 25 million ($6.6 million) for its 51% stake in RMF, according to documents filed with the KRRiTV. This gives the company a valuation of about z-. 50 million ($13.5 million). The valuation is roughly in line with the z-. 20 million ($5.2 million) KFKS paid to buy back 40% of RMF in December from Krakow-based Bank Przemys-owo-Handlowy (BPH).
However, on a price-to-sales basis, Broker's valuation is a multiple of just 0.4 times 1998 sales. According to data from market research firm O¶rodek Badania Opinii Publicznej (OBOP), RMF had gross 1998 sales of z-. 130 million ($34.2 million).
In contrast, Modular Investment, a subsidiary of an Irish radio and telecom company, paid 3.75 times annual sales when it purchased a 33% stake in supraregional network WaWa in 1997. WaWa had national listener share of just 1.3% in January, according to OBOP.
But RMF is the country's largest radio station and in January 1999 it had 36.3% nationwide listener share, ahead of competitor Radio Zet with 31.7%, according to OBOP.
At issue between Tyczyński and his fellow KFKS directors is whether he acted in accordance with the foundation's charter when he sold the stake in RMF to Broker.
According to the charter, changes to the radio station's shareholding structure must be approved by the KFKS chairman and at least one other director.
The sale to Broker was approved by Tyczyński, who is KFKS's chairman, and the foundation's deputy chairman, Marek Jod-owski. During the transaction, the two effectively brokered a deal while sitting at both sides of the table.
In addition to their roles in KFKS, Tyczyński is chairman of Broker and owns 50% of the company. Jod-owski owns 10% of Broker. Dworak and Roman Porwisz, who is RMF counsel, also each own 5% of Broker. The remainder of the company's shares are held by other individual investors.
Broker, which was created as a subsidiary of RMF, handles the radio station's ad sales.
But Nowak said that while the Broker sale may appear to be within the letter of the charter, it is not in accordance with its spirit. He argued the approval of only two individuals was only meant to relate to outside financing deals, not a sale of the station.
Other KFKS members said the moves are part of a continuing push by Tyczyński and his allies to bypass the foundation.
"There has not been a board meeting for the last few years, and we would get to know about decisions regarding the foundation a few months after they happened," said Stanis-aw Handzlik, who is one of two KFKS deputy chairmen. "We have no control whatsoever over the way the money is spent, and this is a very profitable radio station that is still owned by the foundation."
That ownership will change, though, if Tyczyński is successful at the KRRiTV. His request to the media watchdog calls for a change to the station's broadcasting license, which says that KFKS must hold a majority of the voting rights of RMF. This is a move Nowak and others will oppose, but it is not clear the KRRiTV would step in unless they could prove that a law was violated.
"It is a clear move for more control of the station, which in itself does not have to be bad, it's just weird when one person buys shares from himself or herself," said Andrzej Zarzbski, a KRRiTV member. "We just have to make sure that such a change would assure proper operations of the radio station, and that no law has been violated so far."
