Wednesday, July 8, 2009

Freedom and confidentiality in media transactions

I thought for a while about where to put this and decided to post, initially, to the Free Speech Emergency blog because media are one of the most important vessels of free speech. I don't, presently, see any serious free speech issues in the sale of the Latvian media group Diena and the business newspaper Dienas bizness by the Swedish Bonnier Business Press to what will eventually be a mutual fund with investments in Baltic media.
The controversy about this in the Latvian media has arisen from the apparent structure of the transaction. The Bonniers were so eager to sell their Latvian assets that they wanted to do it before the buyer came into legal existence. That is, the Luxembourg-based Catella Media Investment Fund has not been legally founded yet. In order to seize the opportunity, the Estonian financier Kalle Norberg and the Latvian former executive of Diena some years ago, Aleksandrs Tralmaks, organized a temporary arrangement to buy and hold the assets until the final ownership structure was in place.
They also needed to fund the transaction, rumored to be around LVL 9 million, and what they seem to have done is a variation on when an ordinary citizen is offered a chance to buy something two weeks before payday. She doesn't have the cash on hand, but borrows it from several neighbors. They then, technically, become "investors" in "today only" discounted flat-screen television until the end of the month, when our real buyer is paid and pays off her neighbors. Is it important to know who these neighbors are?
OK, I am simplifying the process with Diena and Dienas bizness, but as I understand it, two of the future owners and investors are already known -- Kalle Norberg and Alexandes Tralmaks. They have put up some of their own money. The other investors, who have, for various reasons, wanted to remain anonymous, but both their and Norberg and Tralmaks' shares in the media assets will change when the mutual fund is set up. As more money comes into the fund, which, presumably, will become owner of all shares in the Latvia media assets, the relative ownership proportion of the initial investors will be diluted and will change on a day-to-day basis, as will the identities and number of all owners of shares in Catella Media Investment. Mutual funds trade on a daily basis.
Let us make a wild guess and say that a certain Niklas Z of Skype fame lent USD 500 000 to the transaction entity. When the mutual fund becomes operational, Niklas Z' s loan will be changed into shares of Catella, and the asset that he and all the other mystery men and women will directly own will be shares in a mutual fund. In the short term, of course, most or all of Catella's capital will be invested in Diena and Dienas bizness, but there could be additional purchases of media assets in the future.
Mutual funds are pure instruments of financial investment -- I put my money in fund A, whose managers and investment strategy I trust, and expect to see growth of, say, 40 % when I sell my fund shares in five years. In the interim, the fund, for all I care, can finance chipmunk races and crocodile choir contests, as long as I get my expected return on investment. I am not interested in owning or influencing the management and strategy of any of the fund' s assets, otherwise I would buy those shares directly, in sufficient amounts and put myself or my representative on the board of Chipmunk Racers R Us.
If and when someone in the Latvian media gets a leaked copy of the transaction related investment agreement, it will probably include a rather dull list of Estonian, Danish, Swedish and British names -- Veiko, Tarmo, Niklas, Samantha, whatever. And, certainly, the media will have full freedom to publish this "scoop" and should be protected from lawsuits or prosecution should that happen.
In short, I think the uproar over who the mystery investors in the transactions is overblown and too much energy is put into exploring conspiracy theories. It is certainly necessary to have transparency in media ownership, but things should shortly fall into place. Of course, I could be wrong and the real owners of Diena and Dienas bizness are Elvis Presley, Borat and three Russian oligarchs.


Anonymous said...

That also includes an Estonian name Kalle. By the way, I know Kalle Norberg from his childhood.

Funny Jokes said...

Nice website