Interview with DELFI shareholder Hans Luik

One of Estonia’s richest people and shareholder of DELFI, one of the biggest media groups in the Baltics, Hans Luik shares stories about getting into the media industry, doing business in Ukraine and challenges to free media raised by dictatorial governments as well as technological advances.

In 2007, you invested into DELFI and it was quite an expensive purchase – it still is the most expensive media transaction in the Baltic history. Do you consider it a successful investment?

I do indeed. Our company, Ekspress Grupp, was a publisher of magazines and newspapers with no future. We were profitable but not digital. I decided that we’d better take a big loan to dive into the digital future. Nobody knew that we were simultaneously diving into an international financial crisis.

As for today, we have recovered the loan. Meanwhile, I had to bring my personal guarantees and pledge my belongings in order to secure bank loans for the DELFI purchase. But we are number-one digital news company in the Baltics.

It was a forced situation with DELFI in 2007. DELFI belonged to an American fund called Texas Pacific. They had a 5-year investment horizon, and their five years came to an end. So in 2007 they were selling – either to us or our competitors.

There were a lot of interested parties: Norwegians, who started 15 Minutes afterwards, and Finnish publishers. At the time, when we paid over 50 million euros to Texas Pacific, they chose to invest into a real estate company called Washington Mutual. The financial crises began and Washington Mutual went bankrupt with a huge investment from Texas Pacific. It seems that big money made nobody happy in times of crisis…

Last year, the result of Ekspress Grupp was close to 9 million EBITDA profit. So the risk has been worthwile.

It has not been an all-lucky trip. The thing I regret is DELFI Ukraine. We had great expectations and we kept on investing for years. Editors and IT people from Lithuania and Estonia were helping to support DELFI in Kiev. But there is an oligarchic structure of Ukrainian media market with lots of middlemen. For an outsider, it was too hard to gain foothold in the advertising market. We made the hard decision to close down in Kiev.

Talking about innovation, we believe that there will be less direct mail in our postboxes, because it is not very accurately targeted advertising. We want to take information about retail discounts digital, at our new website Zave.lt. We already have 60 Lithuanian retailers drawn to our idea.

Read more from Delfi.lt

 

Russian company opens a factory in Narva

Estonia’s third largest city, Narva, has a new factory, with Russian paint manufacturer Emlak opening a three-million-euro plant, creating 80 jobs.

Head of the group, Mikhail Polovnikov, said that Narva was chosen due to its proximity to St. Petersburg and due to Estonia’s good business environment.

“Among other reasons, Estonia has a great environment for developing business – all problems are solved hastily. To be honest, in St. Petersburg we would not have been able to set up such a large factory in such a short time, taking into consideration the corruption, for example. It is like going on holiday when we come here,” he said.

He said that the current low point in EU-Russian relations has no effect on the plant as the Estonian subsidiary is an Estonian company and will produce for the European market.

Emlak is one of a number of new plants opened in Narva in recent months, mostly by Russian companies seeking to move or open production in Estonia.

Source: ERR via Estonian Review

Estonian businessman claims 51 mEUR from Latvian state

Estonian businessman Indrek Kuivallik has gone to court against the Latvian state, and is claiming 51 million euros in compensation for his investments, writes Äripäev.

„Suing a state is an extreme measure, sort of last resort,” said Kuivallik who is founder of Estonian cable TV company Starman.

The dispute is between Winergy Ltd that is controlled by Kuivallik and owns Latvia’s largest wind farm, and a local bank Norvik Banka from which Winergy borrowed 18.6 million euros in 2012.

Read more from BBN

Cabinet stops sale of TV broadcaster operator Levira

The government stopped the process of selling Estonia’s sole TV broadcast operator citing a change in the security situation.

“Tallinn TV Tower, owned by Levira, is property of critical importance for offering vital services and the transmitter is a pivotal part of the network which covers Estonia. In the climax of heightened tension in security, it would be short-sited to privatize Levira and the TV tower,” Economy Minister Urve Palo said.

She said the 314-meter tower is a popular tourist object which was only recently renovated at great cost to the taxpayer and any sale would not guarantee it remained open.

The government decided last summer to sell the company but leave the TV tower in state hands, but negotiations with the other shareholder, France company TDF Group, which hold 49 percent of Levira, broke down.

Levira owns 23 transmitter towers across Estonia.

Source: ERR News

Developer of taxi booking app Taxify raises 1.4 mEUR

Taxify, developer of a taxi booking app of the same name, has raised 1.4 million euros to support expansion into new markets.

The founder of Taxify, Markus Villig, said the company will use the investment to reinforce its leader’s position in Eastern Europe and secure rapid growth in expanding into markets of Central Europe. In addition to Estonia, Finland, Latvia and Lithuania Taxify is planning to launch its service in four more countries of Europe in the coming months.

The parties behind the 1.4-million-euro investment are Adcash, Rubylight, Ask.fm and Odnoklassniki, TMT Investments, as well as angel investors Rain Rannu from Fortumo and Indrek Kasela.

Taxify is a taxi booking app with dispatcher and backend software solutions for taxi fleet management developed by the technology company Taxify established in Estonia in 2013. Taxify employs more than 30 people in eight countries.

Source: Baltic News Service through Estonian Review

 

Finnish company is Estonia’s largest private forest owner

The Estonian arm of Tornator Oyj, the third largest wood production company in Finland, recently purchased 13,000 hectares of woodland in Estonia, making it the largest private forest owner in the country.

Tornator now owns over 40,000 hectares of land, although a pale shadow of the close to 600,000 hectares of woodland owned in Finland.

The company grows and manages forests selling the timber or timber rights to logging companies. It registered 1.5 million euros in sales last year.

Estonia is rich in forests – they cover almost half of the country’s territory. The largest forests can be found in the North East and Central Estonia and they stretch from the north coast to the Latvian border. About 10 per cent of Estonia is a nature reserve.

Source: ERR News

EIB provides 200 mEUR to support strategic investments in Estonia

The European Investment Bank (EIB) is establishing a new EUR 200 million loan facility for Estonia to support investments in research and innovation, sustainable transport infrastructure and the development of SMEs. The EIB loan will help Estonia to successfully absorb EU structural funds over the period 2014 – 2020.

“There’s no doubt that EU structural funds have already had a positive impact on the Estonian economy. We must continue to take advantage of these funds in the coming years” said Maris Lauri, the Finance Minister of Estonia, after signing the loan agreement with the EIB. She added: “Our aim is to take a long-term view and invest in building human capital and developing high value-added businesses. But these long-term investments require a lot of capital, even with the availability of EU funds, and that is why we value the on-going support of the EIB in providing long-term financing for projects that will improve Estonia’s competitiveness internationally, in turn creating more and better jobs.”

Pim van Ballekom, EIB Vice-President responsible for lending in Estonia, said: “With this support for key investments, the EIB is stepping up its efforts to strengthen the competitiveness of the Estonian economy and promote the effective use of the EU grant funds earmarked for Estonia. We are building on the excellent cooperation with the Estonian authorities and joining forces with the European Commission to support a large number of projects contributing to sustainable economic growth and a better quality of life for the people of Estonia.”

The EUR 200 million loan will be available as co-financing for selected projects under the Estonian operational programme for the Cohesion Policy Funds and the Rural Development Programme for 2014 – 2020. The EU structural funds will meet a fixed percentage of the costs of eligible projects, with the remaining part being covered from the State budget or by drawing on this EIB facility.  The loan will primarily support projects in the following sectors: research, technological development and innovation; transport, water and environmental protection; and infrastructure development in rural areas. The facility will furthermore focus on investments in education, and health-care, as well as improving training and access to employment. These investments will contribute to the further development of a knowledge-intensive and internationally competitive economy, a clean environment and sustainable transport infrastructure, which in turn will help to create the conditions for smart, sustainable and inclusive growth.

This loan is a continuation of the sound partnership between the EIB and Estonia, with the Bank of the European Union having already lent EUR 550m under a similar EU funds co-financing facility covering the period from 2007 up to 2013. To obtain an EU grant for an eligible project, the government must provide the co-funding. While the co-funding will largely be provided from budget funds, the EIB facility will be available to supplement these funds and to ensure that Estonia uses as much of the available EU funding as it can.

Background information:

The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals. In 2009-2013, the EIB provided loans in Estonia totalling EUR 1.37bn.

Source: Estonian Ministry of Finance

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