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Dogan Sirketler Grubu Holding A.S.

Altunizade
Oymacy Sokak No. 51
Istanbul, 34662
Turkey
Telephone: (
+ 90 216) 556-9000
Fax: (
+ 90 216) 556-9385
Web site: http://www.doganholding.com.tr

Public Company
Incorporated:
1961
Employees: 11,000
Sales: $7.31 billion (2005)
Stock Exchanges: Istanbul
Ticker Symbol: C.DGN
NAIC: 511110 Newspaper Publishers; 519110 News Syndicates; 511120 Periodical Publishers; 511130 Book Publishers; 515120 Television Broadcasting; 513112 Radio Stations; 515210 Cable and Other Subscription Programming; 512110 Motion Picture and Video Production; 447190 Other Gasoline Stations; 721110 Hotels (Except Casino Hotels) and Motels; 524126 Direct Property and Casualty Insurance Carriers; 524113 Direct Life Insurance Carriers; 512220 Integrated Record Production/Distribution; 331222 Steel Wire Drawing; 451220 Prerecorded Tape, Compact Disc, and Record Stores; 336350 Motor Vehicle Transmission and Power Train Parts Manufacturing

Dogan Sirketler Grubu Holding A.S. is the largest media conglomerate in Turkey and also owns controlling interest in the country's dominant petroleum firm. Dogan's other business areas include insurance, retailing, manufacturing, and tourism. Media group Dogan Yayin Holding A.S. publishes eight newspapers including Turkey's leading daily Hürriyet and more than 40 magazines, and also owns the country's leading book publisher; six broadcast and cable television channels; three radio stations; a music company; a chain of magazine/music/office supply stores; and an Internet service provider. Dogan's other major operation is Petrol Ofisi, which runs 3,500 gas stations around Turkey, and smaller subsidiaries include newspaper-affiliated marketer Milpa; tourism unit Milta; insurance firm Ray Sigorta; automotive parts maker Ditas; and steel wire manufacturer Çelik Halat. The family of founder and chairman Aydin Dogan owns a major portion of the company, many of whose largest subsidiaries are publicly traded.

BEGINNINGS

Dogan Holding dates its origins to 1958, when founder Aydin Dogan started his first business. Born in 1936 in the city of Kelkit to a prominent family, Dogan began selling vehicles while a student at the Istanbul Economy and Commerce Academy, and a year after his 1960 graduation founded a company to distribute Ford trucks in Turkey. The new firm proved highly successful, and he was able to use its profits to invest in other ventures.

In 1974 Dogan founded a manufacturing company, and in 1979 he entered the world of media by purchasing the daily Milliyet newspaper for $30 million from Ercument Karacan. The paper had been sold after its politically moderate editor Abdi Ipekci was murdered by Mehmet Ali Agca, who later escaped from custody and shot Pope John Paul II. In 1980 Dogan founded a retail unit called Milpa to sell consumer goods to readers of the paper, while unrest caused in part by Ipekci's assassination led to a military coup d'etat.

In 1984 Dogan launched Milta Tourism Management to operate vacation resorts Milta Kemer and Eldorador Milta Holiday Village. A subsidiary of the latter, Karada Turizm, would run a marina near the resort.

In 1990 Dogan bought a stake in the Ditas company, which made ball joints, tie rods, and other parts for cars and trucks. It was taken public the following year, with Dogan retaining a sizable stake. In 1992 the firm also purchased an insurance company called Ray Sigorta from the government after it was privatized.

In 1993 Dogan's holding company, Dogan Sirketler Grubu Holding A.S., made a public offering of 15 percent of its stock, half of which was sold to domestic investors and half to international ones. Aydin Dogan and his family owned two-thirds of the firm which had a total of 19 business units.

MAJOR EXPANSION IN 1994

In 1994, with an economic crisis gripping Turkey, Dogan bought controlling interest in Disbank, Hürriyet, and Kanal D. The former, acquired for $94.25 million, was an established banking institution, while Hürriyet was the country's leading daily newspaper, and Kanal D a major television station. Another acquisition made during the year was a major offset printing firm, which was renamed Dogan Ofset.

In 1995 Dogan sold a building in Istanbul's press center of Cagaloglu for $5 million, and the following March Anadolu Endustri Holding bought 49.4 percent of the firm's Alternatifbank unit for $35 million. Two major joint ventures were formed during 1996, one with Egmont Group of Denmark to publish children's books by Disney, and the other with Raks Group to sell newspapers, magazines, compact discs, stereo equipment, computers, stationery, and other items through franchise-owned stores called D&R. The latter would become Turkey's largest chain of its type.

In August 1997 Dogan Holding bought controlling interest in bankrupt wire and steel rope manufacturer Çelik Halat ve Tel Sanayi A.S. for $21 million. A life insurance unit, Dogan Hayat Sigorta, was also formed during the year, at the same time that the company began reorganizing its business units to maximize efficiency and earnings.

In early 1998 Dogan Holding joined two separate consortiums that won regional electricity distribution rights from Turkey's energy ministry, which was then starting to privatize the national system. Dogan pledged to invest $239 million of the total $560 million cost, though various legal complications later ended the agreement. The firm also formed a partnership with Sabanci Holding, Dogus Holding, and Telefonica Inter-Continental to bid on telecommunications rights during the year.

In September 1998 the company announced plans to build an $84.8 million paper mill that would produce 200,000 tons of cardboard per year, nearly doubling Turkey's total output of 266,000 tons. Hansol Paper Co. of Korea would help design the plant, provide and install equipment, and train staff. Dogan also announced the sale of 75 percent of the Milliyet paper to rival media owner Korkmaz Yigit for $211.8 million, as it sought to reduce the perception that it had a monopoly on major media properties. The deal was aborted when tapes of conversations between Yigit and an underworld figure surfaced, however, and the tapes later led to the ouster of Turkey's prime minister.

During the year the company's Dogan Yayin Holding unit offered 15 percent of its stock to the public as it was reorganized to become the primary holder of the group's media properties. In addition to the major Hürriyet and Milliyet papers, it also operated several special-interest titles including Radikal, Posta, Finansal Forum, and Fanatik via the Simge sub-unit. Hürriyet continued to be Turkey's leading daily, with circulation of 520,000 (13.5 percent of the total for the country) and 45 percent of total newspaper advertising sales, though combined circulation of Hürriyet and Milliyet had fallen dramatically in the preceding five years from 44 percent of the total to just 22 percent.

COMPANY PERSPECTIVES

Our mission is creating value for our shareholders, business partners, employees and country through transforming new opportunities into success. Balanced and sustainable growth, along with satisfactory profit are the cornerstones of this mission.

The firm's magazine and book publishing was accomplished by Hurguc, with six weekly magazines, 16 monthlies, and four seasonals, as well as AD Yayincilik and Dogan Egmont, with distribution handled by Yaysat (with 69 percent of the national periodical distribution market including many titles from other publishers), and printing done by Dogan Ofset. Dogan Yayin Holding also encompassed the firm's television and radio interests including Kanal D and the filming unit ANS Productions, as well as the D&R retail chain and other related businesses including Milha, Hurha, and DYG Ilan. The Dogan Yayin, Hürriyet, and Milliyet businesses were each separately listed on the Istanbul Stock Exchange.

In 1999 several additional subsidiaries were formed including Frankfurt-based DMG International, which would distribute Turkish newspapers to expatriates living in Europe, while the firm's media group became a 25 percent participant in a joint venture called Dijital Hizmetler Pazarlama that would operate a digital cable television system with 99 channels and some pay-per-view options. Dogan also partnered with the Time Warnerowned Cable News Network to create a channel called CNN Turk which began broadcasting in October, and later in the year founded an Internet service provider company.

ACQUISITION OF PETROL
OFISI: 2000

The Turkish government's privatization efforts were continuing as officials sought to reform the country's economy, and in 2000 Dogan and banking firm T. Is Bankasi A.S. won a bid to buy 51 percent of the state-owned Petrol Ofisi A.S., which operated 4,500 gas stations, or 44 percent of the country's total. The price was $1.26 billion, $100 million more than the top bid of a year earlier which had been canceled when the winner was unable to pay. The new owners appointed Ertugrul Tuncer, the former head of the Turkish unit of British Petroleum, to run the firm, and he subsequently restructured its operations to cut costs, letting two-thirds of the staff of 3,800 go. Some stations were also closed while 400 in prominent areas were remodeled and environmental safeguards improved. Petrol Ofisi's annual revenues soon increased from $3.5 billion to $4 billion.

The year 2000 also saw the acquisition of the Turkish Daily News, the country's leading English-language paper, while the firm's combined Hürriyet and Milliyet magazine publishing operation (now known as Dogan Burda Rizzoli), became publicly traded with the sale of 15 percent of its stock. Later moves involving partners Burda and Rizzoli resulted in a name change to Dogan Burda Dergi Yayýncýlýk ve Pazarlama A.S. several years later.

Another new unit formed in 2000 was Dogan Music Company, which in 2001 began a three-year stint distributing the recordings of major international label BMG in Turkey, as well as those of some Turkish artists. It would subsequently handle the output of industry leader Universal Music Group.

In 2002 new laws were passed that made it easier for media conglomerates to function in Turkey. Where Aydin Dogan had previously used a series of companies to split up his direct ownership stake, he was able to more openly own a number of different media properties.

The Turkish economy had entered a downturn, and as Dogan began reporting losses the firm's newspapers laid off 1,000 employees. A new round of stock was also issued that nearly doubled the company's public "float," while a subsidiary called Dogan Organic Products was founded to sponsor organic dairy farming efforts near Kelkit.

KEY DATES

1958:
Aydin Dogan begins distributing vehicles in Istanbul, Turkey.
1961:
Dogan founds wholesale trading firm.
1974:
Dogan forms manufacturing company.
1979:
Milliyet newspaper is acquired.
1994:
Hürriyet newspaper, Kanal D television station, and Disbank are purchased.
1996:
Company forms joint ventures with Egmont, Raks to publish books, operate stores.
1997:
Stake in steel rope maker Çelik Halat is acquired; life insurance unit is formed.
1998:
New paper mill is begun; Dogan Yayin Holding goes public.
1999:
CNN Turk is founded.
2000:
Control of Petrol Ofisi is purchased; Dogan Music is created.
2005:
Disbank is sold; Star TV, Istanbul Hilton, and larger stake in Petrol Ofisi are acquired.
2006:
One-third of Petrol Ofisi is sold to OMV for $1 billion.

In 2003 the Dogan TV Center took occupancy of the firm's broadcast operations, and late in the year Dogan Holding formed a new company called D Tek Bilgi ve Iletisim Sistemleri as a unit of Milpa to sell office supplies, and bought an additional stake in Milta Turizm for $10.7 million that boosted its ownership share from 30 to 67 percent. The firm also increased its holdings in Çelik Halat from 48 to 52 percent. By this time, Dogan Holding owned or had interests in 120 different firms.

SALE OF DISBANK FOR
$1 BILLION: 2005

In 2004 the consortium Dogan had joined several years earlier to buy telecommunications rights won its bid, and the following year Dogan Holding sold Disbank to the Dutch-Belgian Fortisbank for more than $1 billion while boosting its stake in insurance firm Ray Sigorta to 67 percent. The company also increased its ownership of Petrol Ofisi by purchasing T. Is Bankasi's stake for $503 million, bought the Istanbul Hilton Hotel from the Turkish government for $255.5 million, and acquired broadcaster Star TV for $306.5 million.

In May 2006 Dogan Holding sold 34 percent of Petrol Ofisi for $1 billion to leading European oil and gas firm OMV, retaining 52 percent ownership. In addition to operating gas stations, Petrol Ofisi was preparing to expand into refining. Dogan Holding had also invested in a television station in Romania, its first media property outside Turkey.

Approximately 93 percent of Dogan Holdings' assets were in petroleum and media, with the remaining 7 percent split between retail, manufacturing, insurance, and tourism. Possible future areas of expansion included the soon-to-be reprivatized electricity distribution network, the Turkish national lottery, and a government-controlled mortgage loan firm.

Nearly a half-century after Aydin Dogan first entered the world of business, Dogan Sirketler Grubu Holding A.S. had grown into one of the largest and most powerful conglomerates in Turkey. The firm's areas of operation included media, oil, insurance, retailing, industry, and tourism, and in the future an even more diverse portfolio appeared likely.

Frank Uhle

PRINCIPAL SUBSIDIARIES

Dogan Yayin Holding AS (67%); Ray Sigorta AS (78%); Milpa Ticari; Çelik Halat (52%); Ditas Dogan AS (51%); Hürriyet (60%); Milliyet; Petrol Ofisi (52%); Doðan Burda Dergi Yayýncýlýk ve Pazarlama A.þ.; Ortadogu Otomotiv Ticaret A.S.; Milliyet Pazarlama (65%).

PRINCIPAL COMPETITORS

Medya Holding A.S.; Cukurova Holding A.S.; Ciner Group; BP Turkey.

FURTHER READING

Atalay, Selim, "Tender Rumors Drive Up Dogan's Stock," Wall Street Journal Europe, November 14, 1997.

, "Turkey's Dogan Power Deal Has Promise," Dow Jones News Service, June 22, 1999.

Aydin Dogan Biography, http://www.biyografi.net/kisiayrinti.asp?kisiid=1183, October 1, 2006.

Boulton, Leyla, "A Media Magnate Strikes Back for His Empire," Financial Times, June 6, 2001, p. 15.

"Dogan Holding Transfers 34% of Petrol Ofisi Shares to OMV," Turkey Sectors and Companies Today, May 17, 2006.

"Europe Stock Focus/Dogan," Dow Jones International News, November 13, 1997.

"Petrol Ofisi Sale Fetches $1.26 Billion," Middle East Economic Digest, March 17, 2000.

"The POAS Privatisation," APS Review Downstream Trends, May 20, 2002.

"Turk Dogan Group Buys 50.5 Pct of Celik Halat," Reuters News, August 8, 1997.

"Turkey's Dogan Sets International, Domestic Float," Reuters News, June 10, 1993.

"Turkey's Isbank Sells Disbank Stake to Dogan Group," Reuters News, October 17, 1994.

"Turkish Dogan Group Says Milliyet Sale Aborted," Reuters News, October 21, 1998.

"A Turkish Rupert Murdoch," Economist, February 16, 2002, p. 78.

Dogan Sirketler Grubu Holding A.S

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