Slovak corporate shark joins Central Europe's media feeding frenzy

By bne IntelliNews September 22, 2014

Tom Nicholson in Bratislava -


In a region dominated by financial groups with enormous political clout, Bratislava-based Penta Investments is in a class by itself. No surprise, then, that Penta's media shopping spree targeting half a dozen major Slovak media houses – including the iconic and feisty Sme broadsheet – has open society advocates worried and the Sme newsroom in uproar.

Sme's deputy editor Konstantin Cikovsky threw down the gauntlet in a column published on September 21 about Penta's recent media purchases and its attempts to buy more. “Penta’s media acquisitions are not financial investments,” he wrote. “They are a naked attempt to influence Slovak politics.”

But Penta managing partner Jaroslav Hascak tells bne in an exclusive interview that his media acquisitions should not be viewed as anything but sound business strategy in a market where viable assets can now be had for a song. He admits, however, to irritation that his acquisitions have ruffled feathers, especially given the region-wide trend towards financial tycoons buying up media.

“Journalists often talk as if they come from another planet, as if they are somehow unique, but I see the media market as like any other,” he says. “Why should it be okay on the one hand for Penta to own 25 hospitals, which have an equally important social purpose, and on the other hand not OK for Penta to own media?”

Penta and “Gorilla”

Founded by a precocious trio of 20-somethings educated at Moscow’s prestigious MGIMO diplomatic academy two decades ago, Penta seized control of Slovakia’s wealthiest “privatisation investment fund”, VUB Kupon, in 1997 along with its blue-chip holdings.

Later, under the successive governments of Mikulas Dzurinda (1998-2006), Penta became the country’s most powerful private equity investor, winning privatisation deals and successfully lobbying for reforms in the health sector, now one of its core businesses along with real estate and industry. Penta in 2013 made profits of €100m on revenues of almost €5bn, with interests spanning Central Europe.

Until three years ago, Penta’s remarkable run of success was ascribed to audacity, ruthlessness and the undeniable business acumen of Hascak. But over Christmas 2011, a 100-page file was uploaded to the internet purporting to be a transcript of conversations recorded in a Bratislava flat in 2006 by the Slovak secret service, operating with court approval. Penta has repeatedly denied the authenticity of the “Gorilla” file, its secret service code name, and argues that the transcripts were obtained illegally. A high-level police investigation is ongoing.

The file’s contents – unconfirmed dialogues between Hascak, senior Dzurinda government officials and even current Slovak PM Robert Fico – depicted a hydra of political kickbacks, rigged privatisation sales to European investors, parliamentary vote-buying and years of high-level corruption. Violent street protests followed, and the Dzurinda-led right-wing parties were annihilated in the March 2012 elections, resulting in the first non-coalition government in Slovakia’s independent history led by Robert Fico’s social-democratic Smer party.

Imagine then the public consternation at Penta’s plans to acquire at least half a dozen major Slovak media outlets, something that would have been unthinkable at the height of the “Gorilla” demonstrations. The first two deals (for 7 Plus, tabloid publisher of the country’s most-read weekly and second-best selling daily, along with the respected Trend business weekly) caused shockwaves when announced in early September. But Penta’s latest target – the Petit Press holding – is proving an even bitterer pill to swallow.

Petit Press publishes almost 30 national and regional Slovak papers with a week­ly sold cir­cu­la­tion of around 775,000 copies. This includes the daily Sme, which helped topple authoritarian ex-PM Vladimir Meciar in the 1990s, but paid the price including physical attacks on its journalists, cancellation of its printing contract and confiscation of its owners’ property. For its employees and for open society advocates, Petit Press remains more than just a publisher – a fact underlined in 2012 when a court injunction briefly stopped Petit Press from publishing a book on the Gorilla scandal. That injunction was filed by Penta – the same financial group now offering to bury the hatchet.

“The only legal case we currently have with Slovak media is with a business daily over an editorial that we felt crossed the line,” Hascak tells bne. “We are not even asking for any financial damages. Given the fact that at the height of the [Gorilla] scandal Penta had 3,000 mentions a month in the Slovak press, I believe I have acted with exemplary forbearance.”

Oligarchs in media

Until Hascak confirmed it to bne, Penta was only rumoured to be going after Petit Press. According to multiple sources close to the transaction, Penta hid its interest behind the privately-owned Slovak newswire SITA, which put its name forward on a bid for a 50% stake in Petit Press from German publishing group Rheinisch-Bergische (RBVG).

According to how the deal is allegedly structured, Penta would later quietly buy SITA. The reason for the subterfuge, sources said, was that RBVG had a gentleman’s agreement with the Slovak side not to sell to a financial investor like Penta, dating from 2013.

Penta is far from the only financial group to venture into Slovak media. Rival J&T Group has owned the second most-watched TV station, JOJ, for a decade, while mercurial football sponsor Ivan Kmotrik controls the all-news channel TA3 and dominates the media printing and distribution sectors. Former Communist secret service agent Juraj Siroky (who admitted to his past after his spy file was published) has been associated with the daily Pravda dating back to the 1990s.

And perhaps most famous of all, Andrej Babis, Slovakia’s richest man (#731 on Forbes with a net worth of $2.4bn) and now Czech finance minister after founding a new party that came second in the 2013 elections, owns the largest daily Mlada fronta Dnes as part of his MAFRA print media holding in the Czech Republic, which he bought in 2013 – also from Petit Press owner RBVG.

Penta vs Fico

But like Petit Press, Penta too is different. The other financial groups and post-communist oligarchs who own Slovak media are on good terms with the Fico government; all certainly have benefited economically from its rule. Penta, on the other hand, has consistently squabbled with Fico over its health insurance holdings, and Smer politicians were presumably not best pleased to hear themselves referred to as “a rabble” and “incompetent” in the alleged transcripts of Hascak’s Gorilla diatribes. All of which invites speculation as to whether Penta will use its media for political gain as well.

“I am very sceptical about Penta’s aims, because this is a financial group that is all about money with no history on the media market,” says Grigorij Meseznikov, a political scientist with the Institute for Public Affairs think-tank in Bratislava. “Penta will definitely use its media holdings to increase its power, and if Fico gets in their way, I am positive they will use them against him as well.”

But in an interview with bne on September 21 in Bratislava, Hascak says that the group’s aims are strictly business, and that Penta is looking to buy more media in the Czech Republic and Poland as well. “All three countries are undergoing a strong process of consolidation in the media sector, and we wanted to take part in it. Print media are in a brutal phase of contraction, with revenues falling 7% to 10% year on year, but we believe this will slow to about 4% in the coming years. There is huge over-capacity on these regional media markets with many titles that no longer have any economic rationale for their existence. We have a lot of synergies, and our plans are long-term,” he says.

As for possible newsroom revolts, Hascak says it would be “very unfortunate” if key journalists left Sme, but that he is “prepared to operate it as a start-up from the HR perspective. But I am confident we can avoid that scenario.”

At time of reporting, the Slovak owners of Petit Press, Prva Slovenska Investicna Skupina, were still in talks with RBVG about whether they could come up with the money to exercise their prior right of purchase on RBVG shares in their joint company, and thereby thwart Penta’s intentions. “I still believe PSIS will make use of its prior right of purchase on the German stake,” Petit Press CEO Alexej Fulmek told bne on September 22. “Because if Penta buys a stake in Petit Press, it will damage the company.”



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