Ruch IPO could be winner if company gets act together
Ruch IPO could be winner if company gets act together
Chris Rivituso
Analysts said last week that a government idea to possibly privatize embattled press distributor Ruch through a public flotation may be well received by investors, despite the company's low-margin business and needed restructuring.
The reason the company could be attractive is that, despite its problems, Ruch still has a lock on the press distribution market here through its nationwide network. The company serves more than 9 million customers daily and has a 60% market share.
"Strategically, in terms of logistics, it could be quite valuable," said Georg Hotar, a London-based media analyst with ICE Securities. But he stressed that Ruch must have solid management in place to execute an impending restructuring.
Ruch's original privatization plan called for the company to be sold to a strategic investor. The Treasury Ministry moved forward on that idea in the mid-1990s, and eventually selected French distribution company Hachette in a tender. Those negotiations stalled with a change of government however, and a competing group of Polish companies, Polska Grupa Kapitalowa, offered more money for a smaller stake in Ruch. Hachette sued the government in 1997 and the matter has been tied up in court ever since.
At a meeting of the Sejm's culture committee last week, Deputy Treasury Minister Alicja Kornasiewicz announced that if the courts rule against French distribution company Hachette's claim, the Treasury Ministry would restart Ruch's privatization and possibly shift gears by floating shares on the public market.
Ruch president Marek Czarnecki last week backed that possible change in direction by saying the press distributor does not need a strategic investor. He said that Ruch does need capital and know-how, "but we don't need strategic investors to gain the know-how."
For that to happen, though, the slow-moving courts must rule on Ruch and unfreeze its shares. The case is now in the Warsaw appellate court.
It is unlikely that anything will happen in the courts before the end of the year, said Maciej Hoffman, president of publishing group Wydawcy Prasy, the company that planned to join Hachette in purchasing a 75% share in Ruch.
Hoffman said he had trouble seeing where Ruch would get the experience needed to effectively restructure its operations if it doesn't bring on a strategic investor. "I think there are two roads," he said. A stock flotation may be a good idea, "but there is no know-how."
And Ruch could be a hard sell among smaller investors. Jacek Czeladko, Ruch's chief financial officer, said the company had revenue of approximately zl. 3.5 billion ($860 million) in 1998, with profit of approximately zl. 20 million ($6.5 million). That equates to a miniscule profit margin of roughly 0.57%.
While Ruch projects 1999 revenue will be roughly the same, management intends profit to be only slightly higher at zl. 20 million-zl. 25 million ($5 million $6.25 million). "If a passive investor comes in, he will wait for a long time for a return," Hoffman said.
Czeladko said Ruch wants to increase its margins by decreasing the number of products sold from 20,000 to 3,000 and focusing on items that bring the most profit. By doing this, the company expects to increase its profit margin to 3-4% in the next three to four years.
