Story of a Big Player from Gangnam

Gun-Ho had to write down his name and contact number to get a visitor’s pass. When he finally entered the secretary’s office, there were two ladies sitting at a long desk. The office was very spacious, and those two lady secretaries were pretty. As Gun-Ho entered the office, the two ladies quickly stood up.

“How can I help you, sir?”

“I’m the president of GH Mobile.”

One of the lady secretaries led Gun-Ho to a small meeting room. And, a moment later, a man entered the room and greeted Gun-Ho while showing an acute respect to him.

“Are you President Gun-Ho Goo, sir? I’m the chief secretary.”

The chief secretary gave his business card to Gun-Ho, and Gun-Ho stood up and gave his to the chief secretary as well. He didn’t look like holding a position at the same level as a president, but maybe about the same level as a senior director.

After a moment when Gun-Ho was waiting in a small meeting room, A Group’s CEO Park entered the room along with a man with full grey hair, who looked like he was in his mid-50s.

“Hey, President Goo, you came. This is W Group W Chemicals’ CEO.”

Gun-Ho stood up from his seat and greeted him and gave his business card to the man.

W Chemicals’ CEO said, “Did you bring the documents about your company?”

“Yes, I did.”

Gun-Ho handed the documents and the certified copy of corporate registration to the man. W Chemicals’ CEO started reviewing the documents thoroughly.

The man asked, “The anticipated sales revenue for this year is 84.5 billion won. Is it correct?”

“Yes, it is.”

“This year’s sales revenue seems to have increased substantially compared to the previous one.”

“Even a new restaurant makes a lot of money at the beginning of their business. I guess this company is no exception.”

The two CEOs laughed out loud at Gun-Ho’s joke.

W Chemicals’ CEO said, “So, the company has no debt, and it is holding a significant amount of cash in its reserve right now.”

“That’s correct.”

“If you sell your ownership interest in this company, how much do you want to receive?”

“I told Mr. CEO Park about this before. GH Mobile currently possesses 8.5 million of Dyeon Korea’s shares. The current stock price per share is 20,000 won, so there is 170 billion won right there. If I include the company’s fund in its reserve, which is 55.6 billion won, and the profits that it made for the past two years, which is 15 billion won, it’s 240 billion won. I want to get 240 billion won plus alpha.”

“Hmm.”

“Starting next year, the company will make additional sales revenues from its factories overseas. Its sales volume will increase as well. I’m pretty sure that you can have the full amount of your investment return within 10 years. Therefore, I don’t think that my price is unreasonable.”

“Hmm.”

At that moment, W Chemicals’ CEO stood up from his seat and opened the door, and then he called for the chief secretary.

“Is the chairman available?”

“Yes, he is in his office, sir.”

W Chemicals’ CEO turned around and said to Gun-Ho and CEO Park, “Well, let’s go to see the chairman. Please take the documents with you.”

Gun-Ho and A Group’s CEO Park followed W Chemicals’ CEO out of the meeting room and walked to the chairman’s office. It was the first time for Gun-Ho to be in the chairman’s office of a conglomerate.

The chairman’s office was very spacious, and its floor was covered by a high-end luxurious carpet. Behind the chairman’s desk, there was a shelf, and several Korean traditional ceramic pottery were displayed. The chairman was not at his desk, but he was sitting at a large conference table in his office. He was reading a newspaper, wearing his reading glasses.

“Hello, sir.”

W Chemicals’ CEO and A Group’s CEO Park gave a 90-degree bow to him. The chairman placed his newspaper on the table and lifted his head to see his visitors.

“Oh, A Group’s CEO Park? How is A Group’s chairman doing these days?”

“He is well, sir. As I mentioned before, sir, I came here with Dyeon Korea’s President.”

The chairman glanced at Gun-Ho over his glasses. Gun-Ho thought that the chairman looked very similar to Egnopak’s president. He had a round face that looked swollen. He seemed to have a short temper just like Egnopak’s president as well. Gun-Ho could well picture him kicking his employees when he was younger. The chairman said to Gun-Ho with an impassive look on his face, “Please have a seat.”

W Chemicals’ CEO introduced Gun-Ho to his chairman.

“This is President Gun-Ho Goo from GH Mobile that has a joint venture company with Lymondell Dyeon. He is one of the major shareholders of Dyeon Korea.”

“It’s nice to meet you, sir.”

Gun-Ho gave the chairman a deep bow.

“Hmm, you look very young. Please take a seat.”

The three men sat at the table carefully.

The chairman pressed a speaker button on the table and said, “Bring us four cups of tea.”

“Yes, sir.”

A moment later, a lady secretary brought four cups of tea. She was so pretty. Gun-Ho thought that she looked like an actress.

W Chemicals’ CEO said as he was handing over the company documents and certified copy of corporate registration that Gun-Ho had brought, to the chairman, “The company’s anticipated sales revenue for this year is 84.5 billion won. And, this amount doesn’t include the sales revenue from its factories overseas.”

“Hmm.”

“This company has no debt at all, and holds a good amount of cash in its reserve.”

“The company has no debt? That’s odd.”

“Lymondell Dyeon and President Goo here are the two major shareholders of this company. Each owns 32.7%. The remaining is owned by small stockholders.”

“So, the portion that he could transfer is 32.7%?”

“Yes, sir.”

“If this is a joint venture company, it needs to be discussed with its partner, doesn’t it?”

CEO Park chipped in.

“According to their joint venture contract, each partner can transfer their ownership interest at its discretion.”

“Hmm, is that right?”

W Chemicals’ CEO continued to explain about Dyeon Korea as he was looking at the documents, “The total number of the shares issued so far is 26 million, and President Goo owns 8.5 million of them. Since its current stock price per share is 20,000 won, his portion is worth 170 billion won. According to their balance sheet (B/S), the total amount of assets owned by this company is 120 billion won, including its real properties, goods in stock, and goods-in-process.”

“Hmm. What is the price that President Goo is asking?”

Gun-Ho looked at the chairman’s face and said, “As W Chemicals’ CEO just said, the company’s market capitalization is 170 billion won, and its total assets are 120 billion won. That is all correct. However, this number doesn’t reflect the company’s future business value and its exclusive right to sell in the entire Asia market which the company procured from Lymondell Dyeon.”

The chairman was intently listening to Gun-Ho.

Gun-Ho continued, “If W Chemicals wants to acquire Dyeon Korea, I want to receive its market capitalization of 170 billion won, plus its cash assets of 70 billion won, plus its future value. So, it would be 35,000 won per share.”

The chairman stood up from his seat, still wearing his reading glasses, and walked toward his desk to pick up his calculator.

He asked, “How many shares you said you are holding right now?”

“It’s 8.5 million shares, sir.”

“You want 35,000 won per share for your 8.5 million shares…”

The chairman started doing his math with his calculator. Before he finished his calculation, Gun-Ho gave him the number.

“It’s 297.5 billion won.”

The chairman stopped pressing buttons on his calculator and said, “Did you say 297.5 billion won? Even if we consider the company’s future value and its exclusive right to sell in the entire Asia market, that’s too high. The company’s total assets are 120 billion won, and its annual sales revenue is not even 100 billion won. Investing almost 300 billion won in a company like that is not reasonable. Don’t you think?” The chairman looked at W Chemicals’ CEO and asked for his opinion.

“I agree with you, sir. 35,000 won per share is excessive.”