Market Insight

Dogan Holding to sell all its media properties to Demiroren Holding

March 27, 2018

Constantinos Papavassilopoulos Constantinos Papavassilopoulos Associate Director, Service Providers & Platforms
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Dogan Holding, the largest media group in Turkey, has confirmed that it is in talks to sell all of its media assets, including the Dogan TV channel and pay TV platform D Smart, to Demiroren Holding. Dogan said the value of its shareholdings is $890 million while the enterprise value is $1.1 billion..

In 2011, Demiroren acquired the newspapers Milliyet and Zaman from Dogan. The buyer is active in various business verticals such as distribution and retail sale of LPG, petroleum, mining, construction, real-estate development and metal products. 

Our analysis

If the sale of Dogan Holding’s media properties goes through, it will be the largest takeover in the history of Turkish media. Dogan Holding is the largest media conglomerate in Turkey with interests in publishing and broadcasting (free-to-air and pay), distribution of print media, online media, news agencies and media sales. The founder of the conglomerate, Aydin Dogan, entered the business in 1979 by acquiring the daily newspaper Hurriyet. For the next 30 years, Dogan created a huge enterprise controlling 26 TV channels (national, regional and local), eight daily newspapers, satellite pay TV company D-Smart and online subscription video service BluTV. Dogan also owns Yay-sat, a print media distribution company which is responsible for 40% of national newspaper circulation, a news agency (DHA) operating 30 domestic and 19 international offices, as well as numerous online content sites and a publishing house (Dogan Kitap). Apart from media, Dogan Holding is active in energy, retail, financial services, tourism, construction and industry (metal products).

The decision of Aydin Dogan to sell the media assets he controls is explained by seeing through the prism of the daunting political and financial challenges he was facing. His media empire was a loss-making entity as the advertising revenues of his FTA channels have literally collapsed between 2012 and 2017, losing around 27% of their money value: from 619 million Turkish liras in 2012 to 454 million in 2017. Its pay TV business, satellite service D-Smart, did not produce much more encouraging results either: between 2013 and 2017 D-Smart lost around 10% of its subscribers, according to IHS Markit data. At the same time, IHS Markit  estimates that the overall satellite pay TV market experienced a 7% growth in subscriptions over the same four-year period.

Further distress for Dogan Holding was caused by the perilous state of the Turkish currency, the Lira: Between July 2016 and the end of 2017, the Turkish Lira lost over 30% of its value against the US dollar and around 25% against the Euro. As most of Dogan Holding’s debt is in foreign currency and in the hands of foreign banks and financial institutions, the devaluation of the Turkish Lira is raising serious questions as to how the Turkish company can best serve its debt obligations. Intra-family squabbles, as reported in the Turkish press, might also have contributed to decision to sell. Dogan is a long-time advocate of fiscal discipline and frequently quarrelled with his daughter, who was in charge of D-Smart. The father wanted to sell loss-making D-Smart from 2012 and therefore to stop the financial losses but was faced with the stern reaction of his daughter who did not want to lose control of the company she was managing.

Financial pressures aside, the political situation in Turkey is also a major concern for the Dogan media empire. Since 2008, the Turkish President and strongest politician in the country for the last 20 years, Tayip Erdogan, has adopted an, openly hostile at times, stance against Aydin Dogan. Claiming false and malicious reporting of his government’s actions by the newspapers controlled by Dogan, Erdogan made a public appeal to the Turkish people to boycott all print and electronic media run by the Dogan group in September 2008. In a move to exercise more pressure on Dogan, Erdogan had asked other businessmen who were closely linked with him, like the then owner of Turkish telco Turkcell Karamehmet, to stop buying advertising slots in media controlled by Aydin Dogan. Indeed, between 2008 and 2009 Turkcell withdrew all its advertising from the newspapers and FTA channels of Dogan Holding. Then, in September 2009, Erdogan’s government had levied against Dogan Holding the heaviest ever fine on any Turkish media and telecom company: a record $2.5 billion for alleged tax evasion. The fine delivered a big blow to Dogan Holding finances, forcing the company to sell some of its major media assets like Milliyet and Zaman (sold to Demiroren Group for $74 million) and the TV channel Star TV (sold to Dogus Holding for $327 million).

The political climate in Turkey is far from being described as favourable for independent media outlets like the ones run by Dogan Holding. After the failed coup against elected president Erdogan, the latter unleashed a political campaign, which has been described by international media as witch-hunting: media outlets not favourable to Erdogan have been closed down while around 250 journalists are, at the end of January 2018, behind bars. Currently the media in Turkey are either fully aligned with the government’s views or very mildly, faintly, critical of the President’s actions and policies.

It is certainly telling that during the last four years a number of big media entities, primarily national daily newspapers and national channels, have been acquired by businessmen with close ties with Erdogan: Ciner Group acquired Show TV from Cukurova Holding in May 2013 for $402 million, Ethem Sancak acquired Aksam Medya (newspapers Aksam and Gunes and TV channel SkyTurk360) in September 2014 for $62 million and Kalyon Group’s Zirve Holding acquired ATV channel and Sabah newspaper from Calik Group in November 2015 for an undisclosed sum.   

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