Calik Holdings hopesto auction ATV-Sabah

New York and Ankara/l Rupert Murdoch's News Corp, Time Warner and Texas Pacific Group are among five foreign companies expected to show interest in assets belonging to Turkey's second-biggest media group this week, but international bidders have doubts about the $700 million (Dh2.5 billion) to $1.25 billion auction process leading to a sale.

ATV-Sabah combines a popular television channel and a leading Turkish newspaper. It has been controlled by Calik Holding — whose chief executive is the son-in-law of Recep Tayyip Erdogan, Turkey's prime minister — since it was purchased for $1.1 billion in 2008 with the assistance of two state banks.

Calik Holding, advised by Goldman Sachs, is hoping for offers of about $1.25 billion, but according to one person familiar with the early-stage auction process, most bidders are reluctant to offer more than $1 billion.

European interest

ProSiebenSat of Germany and RTL, the Bertelsmann-controlled pan-European broadcaster, are the other groups expected to show interest, a person close to one bidder said.

News Corp declined to comment but a person familiar with the company said it was "looking at" ATV-Sabah. Murdoch's group is flush with cash after its British Sky Broadcasting bid was derailed by the UK phone hacking scandal. It has also eyed investments in Formula 1 and the Los Angeles Dodgers.

RTL said it was "constantly looking at various potential investments" but declined to comment further. Time Warner would not comment, but is unsure whether to bid, according to one person close to it.

TPG, the US private equity group, did not respond to a request for comment, and ProSiebenSat could not immediately be reached.

Bidders question how serious Calik Holding was about selling, the person close to one bidder said, after their experience with the recent sale of broadcast and newspaper assets by Dogan, Turkey's biggest media group.

"[Sellers] get international players all ginned up who bid up the price but ultimately they go and get Turkish bidders and it's a Turkish solution. The challenge in Turkey is whether you can figure out a way of working with the government," the person said.

Under scrutiny

Turkey's media sector is coming under ever greater scrutiny. The 2008 ATV-Sabah transaction, together with a tax fine on Dogan and recent trials of Turkish journalists accused of terrorism have put media freedom under the spotlight.

Government officials say such concerns are exaggerated and the country's young population and booming economy have attracted foreign media groups — even though Turkey's growth is widely forecast to slow this year.

Rating agency Fitch last week placed Calik on rating watch negative, saying the group would need "additional bank lines or external funding" to pay an upcoming $200 million Eurobond in March.

ATV-Sabah was "still thinly capitalised", it added, and "the ability of the media business to service its debt obligations on its own remains challenging in the intermediate term and the media division could require a cash injection from the rest of the Calik group if it is not sold. Calik has signalled that it does not consider any problem with the Eurobond redemption.

— Financial Times