The RBC Group has already gone down in the annals of history, having dared to conduct the first IPO in Russia in 2002. However, it turned out that this event has not exhausted the imagination of the company’s owners: the holding company declared the other day it planned to sell another 15 percent of its shares through placing a new issue on the open market. According to German Kaplun, a shareholder and the chairman of the Board of Directors of RBC, the funds to be obtained will be allocated for taking over IT companies.

Profil: A boom in initial public offering of shares, which was predicted by analysts, has not yet occurred, and just the 36.6 pharmacy chain, the Kalina concern and the Irkut aircraft-building corporation have followed the example of RBC so far. Are you personally satisfied with the development of the secondary market of RBC’s shares?

German Kaplun: I am really satisfied. Our shares have regularly been on the list of 20 of the most liquid kinds of securities on MICEX. In my view, competing with blue chips in terms of trade volume is a rather good result for a company that does not have the assets of RAO UES or LUKoil.

P: What is the difference between the present additional issue and the IPO that took place two years ago?

G.K.: The main difference is that it is far easier for us now to set a price for the shares than during the initial offering. Additionally, we have extended the group of underwriters that our shares can be purchased from: ATON, Troika Dialog and Deutsche UFG will be the managers for placing the additional issue, and ABD Capital/City Capital will be the financial consultant. Additionally, this time we plan to hold a road show of a bigger scale: presentations will take place not only in Moscow, London and Zurich, but also in cities of Germany, Sweden and Holland.

P: Do you hope that some western fund will buy the entire additional issue?

G.K.: Absolutely not. On the contrary, we are interested in extending the group of buyers. As is well known, a majority of Russian investors speculate, and so do western hedge funds. Investors of a different category, usually, global funds, can buy securities and do nothing with them, knowing they have chosen the right, promising company. We need a combination of both kinds of investors: if there are no speculators but just large funds that are a kind of “beacons” for other investors, the liquidity will be low. At present, RBC has almost 1,000 shareholders, including both major international funds and banks and rather small companies and individuals.

P: As a major shareholder, will you buy out a part of the additional issue, using your preemptive right to buy shares?

G.K.: Financiers think that the volume of this additional issue is not very big, so it will depend on the circumstances. If the demand is limited, I will be pleased to buy a little more than 22 percent of the additional issue that I am eligible for, and if the demand is high, I will prefer the securities to have higher liquidity and therefore, will refuse to buy shares.

P: Are you afraid of the possibility of a single investor buying the entire additional issue?

G.K.: The three major shareholders (German Kaplun, Dmitry Belik and Alexander Morgulchik) hold a controlling block of shares, and the purchasing of shares by a single investor cannot have any effect on the management.

P: Given the current prices, the company can receive about $30m from the additional issue. What will this money be allocated for?

G.K.: It can be spent on acquisitions in the IT and media sectors; it should be noted that we are unwilling to buy into companies that are not directly related to our core business sectors, such as the Internet, software production and business television. Specifically, I would mention IT companies as our investment priority.

P: Is not it dangerous for you as a shareholder that RBC is primarily a knowledge-based company? Possibly, it should start operations in the industrial sector to increase its reliability?

G.K.: I would not say that RBC is just knowledge. There is a brand name, some habits of the people, and you should be aware of how difficult it is to divert an audience to a different media source. As for the prospects, for example, look at the USA, which has moved almost all kinds of industrial production to other countries and as it were, they are making their business increasingly “virtual.” And the rest of the developed world is striving to do the same. Concerning Russia, for example, look at the growth in the IT market or the advertising market, which is expected to grow by 25-30 percent to $3.4bn in 2004. There is no such growth rate in any other country in the world, where the advertising sector grows at an annual rate of six percent on average.

P: What are the exact kinds of IT companies to be acquired: hardware and software producers, system integrators, or some other categories?

G.K.: The RBC SOFT company of our group deals with software development. We have no plans to revise our strategy. However, I am aware of the fact that there is also a huge market of system integration, whose value is to reach about $5bn this year. Nonetheless, we have no general competitive advantage in this segment, where a system of relations between market participants has already been built. At the same time we have been developing software for our internal needs for many years, and the reason why the first clients came to us was that our portal was operable while other resources were facing problems.

Additionally, in my opinion, the software market has the highest rate of growth in the IT industry. When the country had just started to develop, companies primarily lacked hardware, and the time of software has come now. Additionally, the problem of outsourcing has become rather topical on the western market, whose size is just enormous. Over 90 percent of all orders on the offshore programming market are allocated to India. China, Bulgaria and, of course, Russia are trying to “consort” with it. Moreover, it is firmly believed in the West that a Russian company should be engaged for accomplishing a complex task. It is difficult to say whether this is a myth or not, but one should make use of this situation.

P: What will be your criteria for selecting companies to be taken over?

G.K.: What can be interesting at any company? Unique technologies that have a big potential, a client base that could be used for promoting our products and solutions, and finally, one should look at the experience of the team. I believe that IT is a far more difficult thing than, for example, a media business, as in fact, you buy people rather than knowledge. While in the media sector every media source has a stable audience and, regretfully enough, one can change the team while retaining the core audience, people are the main asset at a small IT company. If one fails to give an incentive for development to the management of a company that has been acquired, such a deal could be a failure.

P: So far as I understand, there are no plans to finance RBC TV and the RosBusinessConsulting news agency from the funds to be received from the additional issue, are there?

G.K.: No, there are no such plans. Our news agency simply does not need it, and the TV channel is developing in accordance with a clear business plan, which in total, provides for $25m in investments in RBC TV. We are to reach profitability in April of next year, when incomes are supposed to exceed costs. And the full payback period of the project, taking into account the startup costs, is 3.5 years after the launch of the project.

P: There are some rumors on the market that companies of media magnate Rupert Murdoch had shown interest in your TV channel. Are there any actual reasons for such assertions?

G.K.: We have contacts with different companies, including Murdoch’s firms. However, RBC has no plans to sell the TV channel. Our businesses have developed a great synergy, and the TV channel is inseparable from other divisions of RBC. We have never held talks about selling it.

P: Will there be any principal changes in the media policies of RBC TV?

G.K.: Obviously, the TV channel has undergone some changes over the first nine months of its existence. We have “diluted” business information with some entertainment recently, and cartoons for adults will be shown soon. These will be amusing short cartoons about business, which both show some problem and educate viewers. They can be compared to case studies. However, more serious changes will take place in September, and they will largely be due to our expansion into different regions.