UPDATE: Bids Invited For Dogan Yayin's Hurriyet

Turkey's largest media company Dogan Yayin Holding [DYOL.IS], which is locked in a tax battle with the governing AK-party, is seeking bids for its flagship Hurriyet daily [HURGZ.IS], and has hired investment bank Goldman Sachs group (GS) to advise on the sale, a person people familiar with the matter said Wednesday.

The move signals surrender in what has widely been seen as a political battle between the government and 74-year old Aydin Dogan's media group, and suprised the market just a week after a court suspended demands for payment of part of the tax fines on the company.

The sale of Hurriyet, owned 66.6% by family-run Dogan Yayin, will be conducted separately from the sale of other assets in the media group, which include TV channels Kanal D and Star, according to the person close to the negotiations. In October, Dogan offloaded its controlling stake in the fuel retailer Petrol Ofisi to Austria's OMV AG (OMV.VI), its joint venture partner, for EUR1 billion ($1.3 billion).

The news sent shares in Hurriyet 9.14% higher, while shares in Dogan Yayin gained 2.01%.

A Dogan Yayin spokesman declined to comment on the prospective sale of the newspaper. The company released a statement earlier Wednesday that said "due diligence is continuing on asset sales," but that there were "no new developments that require a statement to the public."

Dogan had previously indicated that it wouldn't sell Hurriyet.

"We would never have expected Dogan to leave the business entirely. Hurriyet is by far the number one newspaper - it has big power in Turkish politics, and that's the significance of the brand here," said Bulent Yurdagul, head of equity research at HSBC Turkey.

"From an investment perspective Turkish media, particularly this asset, is very attractive; advertising spending per capita is very low and there is potential to increase efficiencies and profitability because it is family managed company. Now maybe an investor close to the government will be interested," he said.

Dogan Yayin, which owns newspapers and TV stations accounting for more than 30% of Turkish audience share, has been locked in a dispute with Turkey's Prime Minister Recep Tayyip Erdogan and the ruling Justice and Development Party, or AKP, over a series of tax fines totaling 4.8 billion lira ($3.39 billion), which is more than the value of the company.

The company is looking to raise $2.5 billion in cash to cover the fines, should it lose an ongoing court battle to have them overturned.

The company says the fines are politically motivated. With national elections set for next June, it could be some time before Dogan Yayin commits to a sale, according to the person familiar with the matter.

Dogan media outlets angered Erdogan in 2008 following a series of articles on alleged links between the AKP and a corruption case in Germany. Erdogan at the time called on Turks to boycott the group's newspapers. In an interview with the Wall Street Journal last year, he likened the tax case against the group to that against 1930s U.S. gangster Al Capone. The government says the tax case is purely technical.

The tax case against the Dogan group's media arm, launched last year, prompted widespread criticism of Turkey's government, including from the European Union. Critics described the tax fines as an effort to punish or silence an unfriendly media group, which the government denies. It says the fines are part of a broad sweep of tax claims against companies, aimed at discouraging evasion. Turkcell (TKC), Turkey's biggest telecoms company, in December was fined almost $190 million for unpaid Treasury fees, but no government penalties have approached the scale of those leveled against Dogan.

-By Joe Parkinson and Jessica Hodgson, Dow Jones Newswires' +902122743675; joe.parkinson@dowjones.com

Hurriyet Gazete Tl (PK) (USOTC:HURRY)
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