Third-Generation Chaebol

They needed to acquire Hyundai Semiconductor, but they did not want to pay an excessive amount to get it. To achieve that, Dimon had been working on this for half a year.

"How much would be a good price to acquire Hyundai Semiconductor? The CL Group sold 60% of its shares for 2.5 trillion won, right?"

"Considering that they took on the debts as well, the acquisition price should be seen as 6.5 trillion won. To buy it for a lower price, it would be better to hand over Hyundai Semiconductor to the creditors first, and then acquire it."

"Surely, no undesirable party would take it?"

"There's a forecast that the semiconductor division will incur losses exceeding 2 trillion won this year, so no one would want to take it over."

Hyundai Electronic's semiconductor business was a poisoned chalice. That's why, before the time rewind, it had been held by creditors for over ten years without finding a new owner. Even the CL Group had given up on it—what more could be said?

Although the semiconductor division had been forcibly taken from Hyundai Electronics, the enormous deficit forced the CL Group to refuse acquisition of the semiconductor business. They even made the infamous remark, "We learned to live without semiconductors."

"Can we acquire it for half the price? Around 3.5 trillion won seems just right."

"There is a good method. We can use the same approach that Hyundai Group used with the CL Group."

"Are you suggesting we forcibly take it with the government's help?"

"Of course, government support is necessary, but when Hyundai Group acquired CL Semiconductor, they proposed to buy the shares at the current market price. Since there is a precedent, can't we proceed similarly?"

This was the reason people said the CL Group had its semiconductor assets forcibly taken. When acquiring CL Semiconductor, Hyundai Group didn't recognize the management control premium and insisted on buying shares at the current market price.

"How much has the stock price of Hyundai Semiconductor dropped?"

"When it peaked in 1998, it was over 30,000 won, but now it has fallen to 3,000 won. And every day, it hits the daily limit down. There is even a forecast that if this continues for another year, it will become penny stock."

Hyundai Semiconductor was truly becoming penny stock. The price per share had fallen to about 280 won, as far as I recalled. Hyundai Semiconductor had become known as a toy for stock speculators to play with.

"Then let's leave it with the creditors for a while. That way, the government will have a reason to step in, won't it?"

"Hyundai Semiconductor accounts for about 4% of Korea's exports. It's certain that the government will try to save Hyundai Semiconductor by any means."

"Dimon should work hard behind the scenes. That way, the stock price won't fall any further."

"Even if I don't meddle, it tends to fall, but I'll try to accelerate the decline."

Now, it was time to pass the baton. The preliminary groundwork was done, so the final flag just needed to be handed over to Grandpa. Conversations with the government, the creditors, and company chairmen were more effective coming from him than from me.

***

A month later.

Chairman Kim Tae-jung convened a meeting of the Federation of Korean Industries (FKI). Since the financial crisis, the composition of the FKI members had undergone many changes. Many companies had gone bankrupt, and rankings in the business world had shifted. However, large conglomerates like Tae-woo, Hyundai, Samsung, CL, and KS were still standing strong, so the meeting proceeded without much fuss.

"I know everyone is busy, so thank you all for attending this meeting. Especially today, we are honored by the presence of Chairman Go Seung-taek of CL Group."

Everyone attending the meeting looked toward Chairman Go Seung-taek. He had never attended an FKI meeting since CL Semiconductor was forcibly taken over by Hyundai Group. Yet today, for some reason, Chairman Go was present, and the members were convinced that a major bombshell would be dropped at this meeting.

"As you all know, the financial crisis is not over yet. But the government keeps pressuring the FKI to resolve the companies in distress. That's why I had no choice but to convene this meeting."

"Has the government requested another big deal?"

Chairman Chae Jeong-han of KS Group spoke with interest. While other conglomerates were struggling with a lack of funds, KS Group had ample capital thanks to its cash cow, KS Telecom.

"They are raising issues with Hyundai Construction and Hyundai Electronics. The government says it will mobilize creditors and the Industrial Bank to buy time, but the fundamental problem must be resolved by the FKI."

"I will take over Hyundai Construction. I ask for your support in enabling a reasonable acquisition price," said Jang Kyung-jun of Hyundai Motor Group, bowing his head. Hyundai Construction had already passed into creditor hands, and Hyundai Motor Group was negotiating with the creditors.

"Hmm, Hyundai Construction is also of interest to me. If the problematic parts are removed, it wouldn't be a bad company."

"Chairman Go!"

Chairman Go Seung-taek showed interest. Since CL Group also owned a construction company, it didn't seem like he was trying to obstruct.

"Is there any reason why I shouldn't acquire it? If CL Construction and Hyundai Construction merge, wouldn't they be strong enough to compete for first place with Tae-woo Construction?"

"Hyundai Construction is the foundation of Hyundai Group. I ask for your understanding."

"What good is talking to me? Isn't the decision up to the creditors? Ha ha ha."

There was a reason Chairman Go Seung-taek attended the meeting today. It was to settle scores for the grievance of having CL Semiconductor taken by force from CL Group.

"Let's put aside the issue of Hyundai Construction for the moment and continue with the topic of Hyundai Electronics. I heard Hyundai Electronics plans to separate the semiconductor division and hand it over to creditors—is that correct?"

"That's right. Because the semiconductor division's losses are too great to handle, there was no choice but to make that decision."

Chairman Jang Young-jun spoke in a hollow tone. He even lowered his head, unable to meet Chairman Go's gaze.

"Tsk, tsk, you took away a perfectly fine CL Semiconductor, and now look at the mess."

"The financial crisis and the IT bubble burst made it impossible to do anything."

"Then why covet food you can't even swallow? Tsk, tsk, tsk."

Chairman Jang's face flushed red. He wanted to argue with Chairman Go but stayed silent since there was no denying his words.

"Are there any companies willing to acquire Hyundai Semiconductor? How about KS Group? I've heard they are interested in the semiconductor business."

"Hmm, we are interested but can't acquire it right now. The telecom industry is engaged in cutthroat competition, causing financial difficulties."

Chairman Chae Jeong-han's words were sharp, implying that Tae-woo Telecom was hurting KS Telecom. Chairman Kim Tae-jung ignored it and looked at Chairman Go Seung-taek.

"Hmm, then does CL Group intend to acquire it again? Wouldn't it look better if an electronics company owns a semiconductor company?"

"CL Electronics learned how to live without semiconductors—thanks to Hyundai Group."

No one was unaware of Hyundai Semiconductor's deficit. No fool would take over a company losing about 2 trillion won. The situation was so bad that people would refuse even if it were given for free.

"Hmm, it seems no one is willing to acquire Hyundai Semiconductor."

"May I say something?"

Lee Soo-hyun, President of Korea Exchange Bank, stood up. As the representative of the Hyundai Group creditors attending the FKI meeting, he was given permission to speak.

"When Hyundai Electronics acquired CL Semiconductor, they borrowed money from several banks using various affiliates, including Hyundai Construction, as collateral. If the Hyundai Semiconductor issue is not resolved, all of Hyundai Group's affiliates will collapse, and CL Group, which circulated promissory notes, could also face problems."

"I understand Hyundai Construction was put up as collateral, but I don't understand how other Hyundai affiliates would be at risk."

"Hyundai Electronics also signed contracts with factories in the U.S. It promised to purchase all products produced there, and if it fails, responsibility falls on Hyundai Shipping, Hyundai Heavy Industries, and Hyundai Trading Company."

To acquire CL Semiconductor, Hyundai Group used the entire group as collateral. That was understandable because just before the financial crisis, the semiconductor market was hotter than ever. DRAM prices once reached as high as $8, but now they were barely $1, causing growing deficits.

"Hmm, haven't foreign companies made acquisition offers?"

"Micron in the U.S. did make an offer, but only for the profitable parts of the semiconductor division... They acted as if they would take it only if it were free."

Chairman Jang Young-jun lowered his head as he replied. He had also tried to sell the semiconductor division, hoping to get at least a bit more by selling to foreign companies rather than Korean ones at rock-bottom prices. But the response from foreign firms was extremely cold. They didn't even want to buy it with cash; some even proposed paying for the acquisition with their own company shares.

"There are rumors that the U.S. government is trying to ensure Hyundai Semiconductor becomes an American company. If it's sold cheaply, they supposedly promised to benefit other Korean companies discreetly."

"That's nothing but thievery."

"That's why the government and creditors want a Korean company to acquire Hyundai Semiconductor."

There was no answer. The situation with Hyundai Semiconductor was more serious than anyone realized. No major corporation was willing to acquire it. Even Chairman Kim Tae-jung was about to give up on acquiring it.

At that moment, the door of the conference room slid open, and a wheelchair rolled in.

"Chairman Jang! You should be in the hospital, why did you come here?"

"If you've caused the trouble, shouldn't you deal with it yourself? It's been a long time, everyone."

It was Chairman Jang Young-joo's entrance. Though he had completely stepped away from managing Hyundai Group and was living a hospital-bound life, he dragged his weakened body into the meeting room.

"Chairman Go. This all happened because of my greed."

Chairman Jang bowed his head toward Chairman Go Seung-taek of CL Group. The room fell silent at the sight of the once-powerful Jang, who had made Hyundai Group the top conglomerate, now so frail.

Even the angry and resentful Chairman Go Seung-taek could not find it in himself to say harsh words to Chairman Jang.

"Why did you have to be so greedy? Was owning CL Semiconductor worth putting the entire Hyundai Group up as collateral?"

"It was all my greed. A father's greed wanting to leave decent companies to his sons."

"If you had been so greedy, you should have done it well. Then I could've blamed you freely."

Chairman Go turned his head away. He felt like he might lose control if he kept looking at Chairman Jang.

"Chairman Go, just one favor. I want to protect Hyundai Construction. Young-jun couldn't protect it, so I want to give Kyung-jun a chance this time. Will you grant my last request?"

"How can I grant that? The matter of Hyundai Construction should be discussed with the creditors. That's not my decision."

Chairman Go answered evasively, implying he wouldn't participate in the bid for Hyundai Construction.

Having resolved one issue, Chairman Jang then turned to Chairman Kim Tae-jung.

"Chairman Kim, please save Hyundai Group."