Investor backing gives 4Media confidence to shrug off losses

Publicly traded 4Media posted a zł. 16.5 million ($4 million) net loss in the fourth quarter of 2001, confirming expectations the media company would post negative returns for the year. But Dariusz Kaszubski, vice president of the management board, downplayed speculation that last year's poor numbers bode ill for the company's future. "We never said we'd make a profit in 2001," he said. "We're busy creating a media group through acquisitions of various companies and maybe we overpaid in some cases but you can't achieve a critical mass in this business without a certain number of titles." Kaszubski added that the group's financial results were set to improve and that it expects to post a net profit of zł. 3.8 million ($926,000) for 2002. "We may still make a loss in the first quarter of this year but that will be the last time," he said. "(And) I think we may even exceed (zł. 3.8 million in profit) if our new acquisitions allow that." 4Media is banking on continuing a buying spree it started last year after changing the company's focus, and name, from Chemiskór, a tannery listed on the Warsaw Stock Exchange (WSE). "But if we decide to buy a new title it must be profitable from the very beginning - we'll be very careful," said Wojciech Krefft, the company's president. Last year the group spent zł. 67 million ($16 million) to purchase media companies like Dom Wydawniczy Wolne Słowo (DWWS), the publisher of Życie daily newspaper. This year it plans to expand with cash provided by Global Emerging Markets (GEM), a New York-based private investment group. "We have $5 million from GEM for this year," Krefft said. "But if we need more than that they said we can talk about the next transaction. Most of capital we need this year will be spent on acquisitions." GEM, which specializes in control, minority, and public market investing, has offices in London and Beijing and has so far invested $1 billion worldwide. Under its agreement with 4Media, GEM will buy shares from MediaInvest, 4Media's main shareholder, while MediaInvest will convert its short-term paper (issued by 4Media last year) into the company's shares to be issued in a new share issue. "This deal will allow us to get GEM's financing and (GEM) will be able to immediately acquire 4Media's shares," Krefft said. "It's their first transaction in Poland. Obviously, they weren't interested in us for our financial results. What convinced them was our strategy and dynamic development." Thomas Tuttle, director of GEM North America, was unavailable for comment at press time. Meanwhile, Krefft said the group still planned to float DWWS, Życie's publisher. "But it's not a goal in itself," he said. "We know that our potential investors would like that from us and it will be also attractive (financially) for us because we hold 100% of DWWS." In December 2000, 4Media announced an ambitious plan to become the No. 2 media company listed on the WSE within two years. Today the company owns five print and radio firms: DWWS, Polska Prasa Bezpłatna, a free press publisher, Polska Prasa Lokalna, a local press publisher, Druk Serwis, a printer, and Regionalne Rozgłośnie Radiowe, a radio company.