Stream plans challenging M&A strategy amid heavyweight competitors
That is, of course, once the broadband cable company finds the capital and the critical mass to do so - two concerns that cause some doubts as to the certainty of the company's plans.
After having stayed out of the public eye for the past two years, Stream opted to come to the market with an acquisition to let the market know that, "we are still alive," says Stan Lis, the company's president. "We are the ninth largest TV operator in Poland out of 507 companies," Lis explains. And he says Stream's strategy is to gain market share on its competitors, a group in which he includes, "everyone who's [bigger than] us."
The key to this ambitious strategy, Lis assures, is cash. "We have to raise some serious money," Lis says. He adds that the market is so fragmented in Poland that it doesn't even have to be Stream or one of its existing competitors that pushes for consolidation. Any enterprise with enough money will do so, he says.
And though the company has, over the last three years, encountered hurdles in trying to list its shares on the Warsaw Stock Exchange, it successfully commenced trading on the USA-based OTC Bulletin Board, which it hopes will be a stepping-stone to a small-cap listing on the NASDAQ Stock Exchange and future financing.
Lis says Stream has no hard feelings about the challenges it met in its WSE attempts. "Where would you rather be listed?" Lis asks. He figures its U.S. listing, with an eye toward NASDAQ, will open it up to a wealthier investor base, something it needs if it wants to spearhead Polish cable industry consolidation.
Last week it bought a cable company with 1,350 subscribers and roughly zł.479,000 ($125,000) in annual revenue. Lis reveals that this purchase will augment Stream's 41,000 subscriber roster and help it inch toward reaching its goal of 80,000 by the end of the year. Also, the company boasts that its revenues have increased 10 times from zł.1.15 million ($300,000) in 2000 to zł.11.5 million ($3 million) last year.
These factors, plus the overall appeal of the Polish cable market, should make Stream, which has offices in Vancouver and Kraków, an attractive target for investors. "Our phones are ringing," says Lis, alluding to what he considers to be the popularity of Stream with the U.S. investors base.
Lis reveals that the firm would still look to raise money via NASDAQ, the WSE or through a debt instrument, because Stream has clean balance sheets. But it's just this ambitious strategy that has market watchers, such as Marcin Dusziński, unconvinced about how Stream - with a dearth of financing and market share - would be able to take a sizable bite out of the fragmented market. "I am quite skeptical," says Dusziński, a partner at Capital One Advisors, which advises cable company Vectra.
Other cable professionals scratch their heads at the prospect of Stream gaining any market share on the four industry heavyweights, UPC, Vectra, Multi Media and Aster. This is especially important because these four companies all have more than 300,000 subscribers and cash on hand to make acquisitions of between zł.76.7-115 million ($20-30 million) at a fast clip.
Stream's Lis frowns at these assumptions. "How can they be so stupid?" he asks, noting that any of Stream's detractors must be overlooking its obvious qualities. He boasts that the company's position as a publicly traded U.S. enterprise offers more flexibility than, say, Aster City, which is wholly owned by an international private equity consortium that includes Hicks, Muse, Tate & Furst, Argus Capital Partners and Emerging Markets Partnership.
Furthermore, Lis says that the four leading cable operators control only about 2 million subscribers, leaving the rest of the nation's 12.4 million homes with a TV open to competitors. But there is also the question of why it took Stream three years to try to become listed on the WSE - after which there was no listing at all. One critic said that this could set a precedent for the difficulties Stream will find in procuring other financing. But Lis assures that all the company faced were the standard difficulties in trying to list a company in Warsaw.
First, he says, it had trouble in assigning a custodian - the bank that keeps custody of companies assets - and lastly, the Securities and Exchange Commission demanded more detail from Stream because it's a Canada-based company. Other than that, it was simply the usual market vagaries that kept Stream away from the WSE.
By the same token, Lis says that the postponement of Stream's listing - and its relative silence over the past few years - was not associated with allegations that Stream board member Edward Mazur was involved in the assassination of the Polish chief of police. He adds that not once did he see that issue brought up in readying the company for the WSE. He even claims that it is contemplating having another try at a listing in the future. "If I make allegations against you that you have done something wrong and put that in the press, then I can hurt you no matter whether you did it or not," Lis points out. With all that behind the company, he has streamlined the company's strategy. "We will try to raise as much money as we can where it is most beneficial for our shareholders," he reveals.
After having stayed out of the public eye for the past two years, Stream opted to come to the market with an acquisition to let the market know that, "we are still alive," says Stan Lis, the company's president. "We are the ninth largest TV operator in Poland out of 507 companies," Lis explains. And he says Stream's strategy is to gain market share on its competitors, a group in which he includes, "everyone who's [bigger than] us."
The key to this ambitious strategy, Lis assures, is cash. "We have to raise some serious money," Lis says. He adds that the market is so fragmented in Poland that it doesn't even have to be Stream or one of its existing competitors that pushes for consolidation. Any enterprise with enough money will do so, he says.
And though the company has, over the last three years, encountered hurdles in trying to list its shares on the Warsaw Stock Exchange, it successfully commenced trading on the USA-based OTC Bulletin Board, which it hopes will be a stepping-stone to a small-cap listing on the NASDAQ Stock Exchange and future financing.
Lis says Stream has no hard feelings about the challenges it met in its WSE attempts. "Where would you rather be listed?" Lis asks. He figures its U.S. listing, with an eye toward NASDAQ, will open it up to a wealthier investor base, something it needs if it wants to spearhead Polish cable industry consolidation.
Last week it bought a cable company with 1,350 subscribers and roughly zł.479,000 ($125,000) in annual revenue. Lis reveals that this purchase will augment Stream's 41,000 subscriber roster and help it inch toward reaching its goal of 80,000 by the end of the year. Also, the company boasts that its revenues have increased 10 times from zł.1.15 million ($300,000) in 2000 to zł.11.5 million ($3 million) last year.
These factors, plus the overall appeal of the Polish cable market, should make Stream, which has offices in Vancouver and Kraków, an attractive target for investors. "Our phones are ringing," says Lis, alluding to what he considers to be the popularity of Stream with the U.S. investors base.
Lis reveals that the firm would still look to raise money via NASDAQ, the WSE or through a debt instrument, because Stream has clean balance sheets. But it's just this ambitious strategy that has market watchers, such as Marcin Dusziński, unconvinced about how Stream - with a dearth of financing and market share - would be able to take a sizable bite out of the fragmented market. "I am quite skeptical," says Dusziński, a partner at Capital One Advisors, which advises cable company Vectra.
Other cable professionals scratch their heads at the prospect of Stream gaining any market share on the four industry heavyweights, UPC, Vectra, Multi Media and Aster. This is especially important because these four companies all have more than 300,000 subscribers and cash on hand to make acquisitions of between zł.76.7-115 million ($20-30 million) at a fast clip.
Stream's Lis frowns at these assumptions. "How can they be so stupid?" he asks, noting that any of Stream's detractors must be overlooking its obvious qualities. He boasts that the company's position as a publicly traded U.S. enterprise offers more flexibility than, say, Aster City, which is wholly owned by an international private equity consortium that includes Hicks, Muse, Tate & Furst, Argus Capital Partners and Emerging Markets Partnership.
Furthermore, Lis says that the four leading cable operators control only about 2 million subscribers, leaving the rest of the nation's 12.4 million homes with a TV open to competitors. But there is also the question of why it took Stream three years to try to become listed on the WSE - after which there was no listing at all. One critic said that this could set a precedent for the difficulties Stream will find in procuring other financing. But Lis assures that all the company faced were the standard difficulties in trying to list a company in Warsaw.
First, he says, it had trouble in assigning a custodian - the bank that keeps custody of companies assets - and lastly, the Securities and Exchange Commission demanded more detail from Stream because it's a Canada-based company. Other than that, it was simply the usual market vagaries that kept Stream away from the WSE.
By the same token, Lis says that the postponement of Stream's listing - and its relative silence over the past few years - was not associated with allegations that Stream board member Edward Mazur was involved in the assassination of the Polish chief of police. He adds that not once did he see that issue brought up in readying the company for the WSE. He even claims that it is contemplating having another try at a listing in the future. "If I make allegations against you that you have done something wrong and put that in the press, then I can hurt you no matter whether you did it or not," Lis points out. With all that behind the company, he has streamlined the company's strategy. "We will try to raise as much money as we can where it is most beneficial for our shareholders," he reveals.
