PAP is up for grabs
By : Anna Kocinska
The Treasury Ministry is expected to announce a tender for an adviser in the sale of a minority stake in the Polish Press Agency (PAP) next week.
The ministry said last week it will be selling 45% of PAP and not 49% as it had announced earlier.
"While the treasury will keep 51% of PAP, only 45% can be sold as the remaining 4% will be kept in reserve," said Jacek Grabarczuk from the treasury's department of strategic companies.
According to Grabarczuk, the privatization of PAP is still in a preliminary stage and its form has yet to be determined. "But the funds for an adviser are allocated in this year's budget," Grabarczuk said last week. "We expect that the announcement for the tender will be made no later than in two weeks' time."
PAP was originally a governmental agency established to spread propaganda under the communist regime, but in 1997 the agency was transformed into a 100% treasury-owned company, that was heavily subsidized by the state. Today, according to PAP president Robert Bogdanski, the company is less dependent on state subsidies and last year generated a profit of zl. 200,000.
Since 1997, PAP has undergone restructuring and while in 1998 PAP posted losses of nearly zl. 6 million ($1.46 million), in 1999 they dropped to zl. 2 million ($240,000). At the same time state subsidies dropped from 25% in 1998 to 6% of PAP's revenue this year.
PAP sells news packages to traditional media and Internet providers. In 1998, it started selling economic news packages to non-media business clients. It also has a photo agency, which, according to Bogdanski, should become profitable this year and archives, which, after the installation of a new database, will also become part of PAP's offer.
But if the company's market position is to be strengthened in the long-run, selling the stake in PAP is necessary, Bogdanski said. "It's obvious to anyone who has run a company with an active investor that it's always easier to take the company to the next level," he said. "With respect to the treasury's officers, the question of the company's development is secondary to them, and I would rather have someone who cares about PAP's development."
Bogdanski wouldn't reveal the financial status of the company as its evaluation, made by an independent auditor, is in the works. "All I can say is that it's now a normal and healthy business and because it operates in the news sector it has a future," Bogdanski said. "No matter what happens in the economy, there will always be a demand for information."
Meanwhile, no potential buyers have shown any interest in the company. But Grabarczuk said there is no other way of verifying market interest than inviting potential investors to submit bids. "All the rest is theory," he said. "Of course the ministry can give up the whole procedure if it turns out that there are no companies interested in the sale."
As far as investors are concerned, Bogdanski said that financial investors, such as venture capital funds, were unlikely. "I would rather believe in an investor from the media sector, including ones from new technology, media or telecoms," he said. "Such companies have the know-how to develop companies (like ours) and synergies could occur."
Tomasz Welnicki, a member of the parliamentary media committee and Solidarity Election Action (AWS) deputy, said that prospective buyers would probably come from the new media sector. "If it was a portal, it could develop a large information network and as part of the world Net it wouldn't block access to information produced at PAP to its competitors," Welnicki said. "And if some traditional medium bought a stake in PAP, it could lead to using the agency as an arm against competitors."
Potential buyers, however, still see PAP as an inefficient, state-run company and are skeptical of agency statements that the company is no longer running up losses.
"Two years ago, we were interested in working with PAP, today we have some of their people in our company," said Maciej Grabski, vice president of Wirtualna Polska, Poland's second-largest portal. "First of all, PAP would have to undergo some kind of a major upheaval," he said. "Right now its procedures regarding circulation and construction of information are not good. It's a petrified company."
Other market insiders said a competitive Internet information service could easily be created without PAP.
"It's possible if you are able to establish a network of local correspondents like the one PAP has," said Grzegorz Wojcik, vice president and planning director at Interia, the first Polish portal to list on the Warsaw Stock Exchange (WSE). "There are two media groups that have such a network anyway: Agora (media group, publisher of Gazeta Wyborcza) and (commercial radio station) RMF FM. If some other group would like to do it, it could base itself on a network of local papers."
According to Welnicki, other buyers, such as those from the traditional media market, could also be interested in PAP.
"Take (private broadcaster) Polsat and Agora, these are media moguls and I think they could participate in the contest," he said. Agora's spokeswoman, Dorota Nowak, ruled out this possibility.
"It's not going to be us because it's not in line with our strategy," she said.
While most media players appear skeptical about buying a minority stake in a treasury-run company, its privatization won't necessarily be a failure.
"I can't agree with the conclusion that because the treasury isn't offering a majority stake, privatization isn't possible," said Wojciech Roman, a partner working in the Corporate Finance & Recovery unit of PricewaterhouseCoopers. "The only thing we are talking here is whether there are companies that may decide it's good business for them."
