* Axel Springer says 29 percent purchase plan cancelled
* Shares down 7.5 percent
(Recasts, adds Axel Springer comment)
By Birsen Altayli
ISTANBUL, Nov 25 (Reuters) - Turkey’s largest media company Dogan Yayin DYHOL.IS said on Wednesday it was resuming its legal challenge to a record 4.8 billion lira ($3.2 billion) tax fine after the failure of settlement talks with tax officials.
The lack of a deal sent its shares down 7.5 percent and added to uncertainty over the future of Dogan Yayin, which has been embroiled in a dispute with the government over its critical news coverage for more than a year.
The concerns were fuelled further by comments from German publisher Axel Springer AG (SPRGn.DE), which said it cancelled a plan to buy a 29 percent stake in Dogan Yayin after the tax talks failed. [nWEA2821]
But Dogan and Springer could talk again after a court ruling, Springer said.
“Once we have legal clarity then we could approach each other again,” Springer spokeswoman Edda Fels told Reuters, adding that a new purchase contract would have to be negotiated.
Axel Springer said it would retain its 25 percent stake in Dogan Yayin’s TV unit.
Dogan Yayin, which owns a series of prominent newspapers including the daily Hurriyet, as well as major television interests such as broadcaster CNN Turk, pledged to continue its lawsuits against the fine.
“There has been no settlement reached by Dogan Yayin or its units with the Finance Ministry’s tax authority. As we have previously said ... we will continue with the legal process against the tax fine in the case that no settlement is reached,” it said in a statement.
Critics of Prime Minister Tayyip Erdogan’s government say the case against Dogan, which controls half of Turkey’s private media, is politically motivated.
The government has denied this, saying Dogan was acting like an opposition party through its critical coverage.
LONG LEGAL PROCESS European Union governments are following the case closely with an eye to the levels of press freedom in Turkey.
Diplomats have said the prospect of a media critic of Turkey’s Islamist-rooted government being fined into extinction would reflect poorly on Ankara when it is bidding to become an EU member. [nLD723469]
“The legal process can take a long time, even years. This means the uncertainty surrounding the issue will continue and be reflected in the stock performance,” analyst Onder Zorba at brokerage Ata Invest said.
Shares in Dogan Yayin have fallen 31 percent since September 2008, when Prime Minister Tayyip Erdogan accused media mogul Aydin Dogan of using his newspapers and television stations to defame the government. The Istanbul Stock Exchange .XU100 has risen 13.5 percent over the same period.
Dogan Yayin shares ending the morning session traded down 7.5 percent at 1.24 lira, while parent company Dogan Holding shares dropped 8.8 percent to 0.93 lira, compared with a 0.15 percent rise in Istanbul’s benchmark index.
A meeting between Dogan Yayin and tax officials to resolve the stand-off began on Tuesday and lasted until the early hours of Wednesday.
Gedik Investment Research Manager Onur Mutlu said he had expected a deal, but suggested both sides could try again.
“We thought a deal for a tax fine of maximum 500 to 600 million lira would be signed. It will affect the stocks negatively, but we don’t expect dramatic decreases because this risk had been priced before and the sides may sit down again for an agreement,” he said.
The fine, related to accounts of Dogan Yayin units from 2005 through 2007, was imposed on the grounds the share exchange transactions among Dogan TV units did not comply with corporate income tax law.
Dogan has rejected the charge.
(Additional reporting by Thomas Grove and Peter Maushagen in Frankfurt; Writing by Alexandra Hudson and Daren Butler; Editing by Simon Cameron-Moore and David Cowell)
((For a timeline on Dogan Yayin’s battle with Turkish authorities, please click on [nGEE5AO0YT]))
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