Krug, Ltd.

A Small Enterprise Assistance Funds (SEAF) Portfolio Company

Macedonia

Convinced that there was a great appetite for newspaper reporting that was independent of political influence, a group of experienced journalists working for two of Macedonia's largest government-controlled newspapers came together in 1995 to create Krug, Ltd., a publishing company determined to launch the country's first independent daily newspaper, Dnevnik. Their paper is now the best-selling newspaper in Macedonia -- and most trusted according to a recent poll -- with a daily circulation that has exceeded 70,000 copies.

In its early years, government-controlled newspaper kiosks and print houses shunned the upstart paper. Krug's founders survived and thrived by outsourcing Dnevnik's printing to a foreign print house and hiring "newsboys" to sell the newspaper directly to the public on street corners throughout Macedonia.

But the real growth began in 1998, when Krug turned to Small Enterprise Assistance Funds (SEAF). Through SEAF's private-equity fund locally managed in Skopje, Macedonia, SEAF invested less than $500,000 and became the company's single largest shareholder. Beyond capital, Krug was attracted to SEAF because of the significant business development assistance the organization offered management. Working together, Krug completed the successful installation of a used Swiss printing press, expanded the geographic scope of its distribution network and improved its marketing and pricing strategies.

During the four-year period of SEAF's involvement with Krug, revenue and profits more than doubled. In the process, Krug's full-time workforce grew from 65 to just over 140 employees. Including the local "newsboys", Krug currently provides over 300 local jobs. Of equal social significance, Dnevnik is credited with spawning the print media industry in Macedonia.

Recently, a leading German print media company made an offer to Krug's shareholders to acquire the company. With a clear commitment to Dnevnik's independent voice, the German multinational is also preparing to finance Krug's strategic expansion. For SEAF and Krug's selling shareholders, the transaction represents a gain of more than 8 times SEAF's initial investment.

SEAF Macedonia