Investor That Can See The Future

Chapter 160

The fact that Chairman Im Jin-yong is coming to the US was not known to the media either.

Why did someone who was already busy with group management suddenly appear here?

The issue of stock exchange can be discussed after I return to Korea. However, the best time to come and talk about it is now that we are struggling with mass production… … In other words, it may be because Suseong Electronics decided that it was the cheapest opportunity to acquire the Karos stake.

So, he must have pointed out the problems with mass production first, and then pretended to make concessions and talked about the exchange of shares.

If I had suddenly received the offer, I might have been dragged around the whole time negotiating in embarrassment, but seeing foreknowledge gave me some time to think.

You mentioned that you could supply the software to other companies, but that’s also problematic. When a car with the same autonomous driving technology is released, who will buy our car?

Again, Chairman Im Jin-yong pointed out that point.

“If you do that, the differentiation of Karos tea will disappear.”

“Instead, we can quickly dominate the autonomous driving market.”

“In the case of automakers that are developing their own technology, they will not install Karos software until they give up their technology.”

“It is true for companies with some level of technological prowess, but the situation will be different for companies that have already fallen behind in the competition.”

Once software starts to depend on it, it’s hard to get out of it.

Therefore, Mercedes-Benz, BMW, and Nikola are highly likely to refuse even if we provide software for free. However, small and medium-sized enterprises (SMEs) that lack scale and technology will gladly take our hand.

Chairman Im Jin-yong had a troubled expression.

“I acknowledge that Karos has high technology and high growth potential. Taking that into account, the calculated ratio is 1 to 4. Article 150 is nonsense.”

That’s right.

However, the value of Karos is important, but more important than that is how much Karos is worth to Seo Sung Electronics.

The reason we pay a premium above the market price in M&A is that we expect synergy effects.

Seosung Electronics added a 30 percent premium to the stock price at the time of its acquisition of Herman.

Herman was valued at 6 trillion won when operated independently, but it was judged to be worth more than 9 trillion won after being incorporated as an affiliate of Seosung Electronics.

What will the driver do while the car moves on its own?

You will enjoy other leisure activities during that time. Search the news, watch a movie, listen to music, relax and more.

Since the self-driving car is a connected car equipped with GPS and various communication equipment, Seosung Electronics is probably thinking of linking with its own smartphone in car infotainment and external control.

Seosung Electronics is the world’s number 1 smartphone sales company. More than 300 million smartphones are sold worldwide each year. However, in the premium market, they are fighting with NPL, and in the mid-to-low-end market, Chinese companies are aggressively attacking.

In order for Suseong Electronics to maintain its hegemony in the smartphone market, it must provide a value differentiated from other companies, and self-driving cars play an important role here.

If you think about it, like in the case of Seoseong SB, it was Chairman Im Jin-yong who reached out first. That’s because there is so much that can be gained through cooperation with us.

In the end, what’s sad about it?

“For the continued cooperation between the two companies, wouldn’t it be better for Carlos to own as many shares of Suseong Electronics as possible?”

That will push the volume too.

“Even so, 1v2 is impossible. Shareholders will never agree.”

If it is 1v4, it can be judged that it is the discretion of the management, but it is not enough to be sued for negligence if it is 1v2.

I have figured out a way to do that.

“Can’t we decide on the future value in the future? After one year, why not give us the right to purchase the shares to exchange the shares?”

“… … .”

Chairman Im Jin-yong made an expression that he ate a herbal medicine.

* * *

Negotiations continued for a long time.

The war of words that started with the share exchange ratio has expanded to various conditions throughout the business. I may be pushed back if it is my overall management skills, but when it comes to negotiating shares, I am not too strong.

This is because he has been investing in startups, etc., negotiating directly or watching Hyun-joo’s sister negotiating closely.

After hours of conversation, we reached a consensus.

First, they agreed to exchange a 3 percent stake in Suseong Electronics and a 10.5 percent stake in Karos. And a year later, it was decided to exchange an additional 7 percent stake in Suseong Electronics and a 14 percent stake in Karos.

However, in this regard, Seosung Electronics decided to have the right to purchase. After one year, after calculating the share price of Suseong Electronics and the value of Karos, if it is determined that the ratio is unfavorable, the right to purchase may not be exercised or only partially exercised. It is a kind of call option.

Some conditions are added here.

As the purpose of the partnership is to strengthen the partnership, the sale of stakes is prohibited for 10 years, production volume is prioritized to Suseong Electronics, preferential and continuous cooperation on comprehensive vehicle solutions such as autonomous driving as well as telematics and car infotainment, and pacing in the future Karos stake sale Grant of preferential purchase right to the former, etc.

When the contract was negotiated, the lawyer at the legal team of Suseong Electronics, who was waiting, made the contract according to the existing form.

As OTK Company is an American corporation, the contract was written in both Korean and English versions.

On our side, Ellie reviewed the contract on my behalf.

Ellie is an expert in this field, as she mainly worked on M&A with her older sister Hyun-joo at the Golden Gate Asian branch. However, she looked closely at each letter without looking at it in vain.

In a contract, the contents of a single word and even a comma change.

For example, ‘guarantee of principal’ in an investment contract means that it guarantees 100% of the principal, but ‘preservation of principal’ means that we strive to keep the principal and take no responsibility for any loss.

Ellie asked for corrections to some phrases and words, and Seo Sung Electronics’ lawyer accepted it.

After reviewing the contracts of both lawyers, I and Chairman Lim Jin-yong each signed electronic signatures.

The issue of treasury stock disposal is subject to a resolution by the board of directors. I also have to get the consent of Karos management for other conditions other than the share exchange. Therefore, the time when the contract enters into force is thereafter.

Of course, there will be no problems on our side, and the board of directors will pass without any problems as Suh Sung Electronics also has a firm leadership of Chairman Im Jin-yong.

Once the share exchange is executed, Seosung Electronics immediately becomes the second largest shareholder with a 10.5 percent stake in Karos. It is unknown whether or not the purchase right will be exercised later, but this alone will make the foresight come true.

If Seosung Electronics exercises its purchase right after one year, Seosung Electronics will hold 24.5% of Karos’s shares and Karos’s will hold 10% of Seosung Electronics’ shares.

Carlos will overtake the National Pension Service and become the largest shareholder of Suseong Electronics!

Chairman Im Jin-yong said with a sigh.

“Now the job is to convince the shareholders.”

The board of directors is no different, but the shareholders are not.

Chairman Im Jin-yong’s stake in Suh Sung Electronics is less than 3 percent. If you add up all the shares in affiliates with controlling power, it is around 20 percent.

On the other hand, the Korean National Pension Service holds more than 9 percent, while foreign pension funds and funds own 53 percent.

Major shareholders will have to meet in person to explain the situation and persuade them.

After all, only 3% of the treasury shares are exchanged immediately. You may think that you lose money at the exchange ratio of 1 to 3.5, but considering the various conditions attached to the contract, you will be fully convinced.

You’re more likely to think that the 1:1 ratio is nonsense. But that’s for you to decide then.

If it is judged that the Karos value is less than half of the value of Suseong Electronics at that point, it is enough not to exercise the purchase right.

I remembered the largest shareholder of Seosung Electronics.

“Are you going to oppose the National Pension?”

Eun Seong-cha and Park Si-hyung would of course not welcome the union of Carlos and Suh Seong-eun.

“Since the lame duck started after the savings bank crisis, it will be difficult to exert as much power over the National Pension Service as before. It must be hectic to block the political offensive of the opposition.”

To say the least, political and economic collusion is an old practice, and few politicians or bureaucrats are completely free from the influence of the Seoseong Group. There are probably not one or two people in the National Pension Service who are also related to the Suseong Group.

Of course, I don’t know if the president strongly orders it, but as I just said, that’s not the case right now.

“It will not be easy for the National Pension Service to find a justification to oppose it, as long as it wins the approval of other shareholders.”

You’ve been thinking about the future.

“You are confident too.”

Chairman Im Jin-yong smiled bitterly.

“Still, I have to go and say sorry. In times like these, I envy my juniors who don’t have to worry about shareholders.”

“… … .”

to be stingy.

“We will immediately start investing in facilities for mass production. AP and semiconductors have already allocated supplies to the Austin and Hwaseong plants.”

I burst out laughing.

“You have everything ready.”

We talked in a comfortable atmosphere.

Chairman Im Jin-yong revealed his innermost thoughts.

“As you know, the two main axes of Suseong Electronics are smartphones and semiconductors. However, the growth of smartphones is slowing down, and the current semiconductor boom will end someday. China’s challenge is not formidable on both sides.”

Chinese smartphones are entering the global market one after another based on their excellent cost-effectiveness and huge domestic market.

Here, at the government level, China is declaring itself to become a semiconductor leader and is making huge investments.

As the technology gap is large, it may not pose a threat right now, but we do not know what will happen in 10 years.

Come to think of it, who would have imagined that even 10 years ago, the technological prowess of Chinese companies would grow to this extent?

“Semiconductor was started by his grandfather, and the smartphone business was brought up by his father. It is my job to prepare for the next one.”

“That’s why you chose the automotive electronics business.”

Chairman Im Jin-yong nodded his head.

“It is a large and rapidly developing industry.”

Autonomous driving is the core of the 4th industrial revolution.

Not only automakers, but also electronics companies, IT companies, ride-sharing companies, and other leading companies around the world are jumping in and competing.

BMW, Audi, Benz, Toyota, Silver Star, Nvidia, Nikola, NPL, Gubble, Iver, etc.

Level 3 has already been commercialized, and some companies are approaching level 4 completion. In the case of Gubble and Iver, which are considered the leaders, they succeeded in driving thousands of kilometers with autonomous driving alone.

But being close and being completed are two different things. Completing the technology and mass-producing it are two different things.

“All companies have jumped into technology development, but this state won’t last long. In a few years, the market will be reorganized around two or three of the most mature companies. Just like the smartphone OS market has been organized into NPL’s NOS and Guble’s Andromeda for the first time in a few years.”

I nodded.(Read more @ wuxiax.com)

“In a few years, other companies will catch up with Karos’ technology. However, if mass-produced cars are released first, the technology gap will widen.”

Quantity guarantees quality.

Everyone laughed when he said that China was jumping into the high-speed rail business. In fact, China showed its inexperienced operation and caused numerous accidents.

However, a few years later, he succeeded in winning the California high-speed rail project, shocking everyone.

That is the power of the Chinese domestic market.

The know-how accumulated by other countries operating 10 routes for 10 years, China has caught up with 100 routes by operating it for one year.

“Now that the contract is over, to be honest, I think Karos will build a monopoly, not two or three companies.”

When mass-produced cars are released, it will be possible to collect various data from millions of vehicles when other companies collect data from dozens or hundreds of experimental vehicles.

And based on that data, we will improve the system and release better products.

“Will the car sell well?”

In fact, it is true that there is anxiety in the corner of your heart. If the new car fails, not only Karos but the OTK Company will be hit hard.

Chairman Im Jin-yong answered my question simply.

“You’d better worry about how much you can produce than how much you sell.”

I laughed out loud.

After the conversation was over, he got up from his seat.

“Then I’ll see you at the presentation.”

“Yes.”

When I looked out the window, the sun was already setting. Turns out, I even skipped lunch. It was as if hunger had suddenly hit me.

I was about to ask her to go eat, but Ellie was already staring at me with both her hands on her chin.

“What’s wrong?”