Sziget Slips Through Econet
Econet’s bid to take over Hungary’s Sziget Festival appears to have come unstuck as the media giant is struggling to pay off the loans it needed to acquire a half-stake.
The only option left open to Econet seems to be to selling its stake back to Sziget Cultural Management, thereby restoring the historic event to its original ownership.
In the lead up to this year’s 20th anniversary edition Aug. 6-13, Est Media unsuccessfully tried to sell off its 49 percent stake to pay off the 650 million Hungarian forints ($2.88 million) it borrowed to acquire it in the first place. Econet subsidiary Est Media started buying into Sziget in 2007.
The Hungarian national press says the company’s total debt of 860 million forint ($3.8 million) fell due at the end of July but UniCredit Bank and Wallis Asset Management extended their deadlines to Aug. 6 when the potential sale fell through. The Budapest Business Journal says the deadlines have since been further extended to the end of August.
The breakdown of talks with the unnamed potential buyer means that reselling the stake to festival co-owner Sziget Cultural Management now seems the only escape route for Econet.
SCM managing director Gabor Takacs confirms that he and partner Karoly Gerendai are in talks with Est Media about buying back the shares they’ve already let go.
He wouldn’t say how negotiations are progressing or if Sziget Cultural Management would also need a loan to buy back the shares.
In the five years since Est Media started its four-phase plan for 100 percent ownership of Sziget, the company’s fortunes have slumped and the festival itself has struggled to make money.
The former media and telecommunications giant’s revenues have tumbled due to the falling circulation of its various publications and the closure of one of its radio stations.
The festival is said to be providing the vast majority of Est Media’s annual income. Selling its “crown jewel” will mean the media group returning to what the country’s RealDeal business website described as “a garage company,” although it would then be free of its massive debt.
On July 18 its shares dropped 15 percent to 23 forint (about 10 cents) as it became clear it needed to hive off its share of Sziget.
Earlier in the month Est Media had decided, due to weak demand, not to proceed with a plan to raise the money by issuing convertible bonds in a private placement.
The Budapest Times says Est Media will now need to sell its share of the festival to its co-owners for 677 million forints ($3 million) – about 27 million forints more than it paid for it – unless it can clear its bank debt by the end of August.
The Hungarian capital’s English-language paper also says Sziget, the oldest and largest music festival to have started in the old Eastern Bloc, has had to hike the price of the full festival pass by about 19 percent to euro 225 ($278) and cut costs in order to balance the books.
Crowd figures for this year’s festival weren’t available at press time. The lineup included Snoop Dogg (now Snoop Lion), The Killers, The Stone Roses, Placebo, Korn, Sportfreunde Stiller, Sum 41, The Vaccines, and The Pogues.