The fine, against which Doğan is appealing, roughly equals the $2.7 billion combined market value of the firm and its parent company, Doğan Holding, raising concerns about the impact of the fine and the appeal process on the group's finances. "The way for a settlement is open for the company on this dossier, so the settlement option can be tried," a government source, who declined to be named, told Reuters. A tax authority official said Doğan had already applied to negotiate a settlement. This was the second major fine this year for Doğan Yayın.
The Taraf daily reported on Thursday that Finance Ministry officials and Doğan could meet on Sept. 23 to discuss the possibilities of a settlement in the tax fine issue. Noting that this is a routine process since Turkish tax law gives the side slapped with a fine the right to negotiate with the Finance Ministry, Taraf said swift reconciliation between Doğan and the government is yet a distinct possibility. The daily also said Doğan had accelerated talks with its Austrian partner, OMV, to discuss the sale of part or all of its stake in fuel retailer Petrol Ofisi (POAŞ). Doğan expects to repay some part of the TL 3.7 billion tax fine with the money it will acquire from its sale of POAŞ shares. Analysts suggest Doğan could finally take the issue to court.
 A view of the Doğan media group headquarters in İstanbul. Doğan Yayın was hit by a record $2.53 billion tax fine levied on Tuesday. |
Ertuğrul Özkök, the editor-in-chief of Hürriyet, Doğan's flagship paper, said on Thursday in his column that it will be very difficult for the holding to survive through an anticipated three years of legal procedures. “Let alone our company, even the world's giant media groups such as The New York Times cannot make it through such a stringent process,” he said. Analysts discussed Özkök's remarks as an expression of the group's willingness to negotiate with the Finance Ministry over the “unprecedented” tax fine.
The Finance Ministry fine on firms controlled by Doğan Yayın was twice as high as the TL 1.88 billion tax arrears assessed on the company after examining accounts from 2005 to 2007, Doğan Yayın said in a statement on Tuesday. Government sources said the fines were justified, given the size of the alleged tax fraud. A government source told Reuters that Doğan Yayın will need to raise collateral during the appeal process, something the company found difficult when it appealed a separate $500 million fine in February. It was unclear how much collateral Doğan must raise now.
"To come up with the money, Doğan Yayın would either have to sell assets or raise a significant amount of capital and request money from the [Doğan] holding," said Tuncay Turşucu, head of research at Meksa Securities.
Following news that the tax authority was open to negotiating the fine with Doğan, the group's shares trading on the İstanbul Stock Exchange (İMKB) showed signs of recovery at the end of the first session on Thursday. After two days of steep drops, Hürriyet Gazetecilik shares gained 11.3 percent on Thursday while the increase in Doğan Yayın was 8.49 percent. Doğan Holding shares rose 5.6 percent and Doğan Gazetecilik shares were up 4.89 percent. On Tuesday, shares in Doğan fell as much as 20 percent, but the following day they rebounded and were down about 10 percent.
