Journey 1995:Non-Stop

Chapter 383 Strength
A tile factory of this size is certainly quite technologically advanced, and since everyone involved is an industry professional with established sales channels, the market is also quite good.

However, it's easy to share hardship, but difficult to share happiness. The production line had only been running for three months when people started arguing over profit sharing.

Everyone involved is an industry professional, with shareholdings ranging from 7% to 25%. No one has absolute say. The seven shareholders from four families each have their own abilities. Some people feel they should get a larger share after securing a new business, which leads to conflicts.

A company is ultimately resilient when it comes to making money. In order to satisfy everyone as much as possible, the major shareholders jointly decided to distribute as much of the profits as possible as dividends.

Therefore, from the end of 2005 when the factory was built until late April 2008, this tile factory had distributed nearly seven million yuan in dividends, but had not used the money for expansion and technological improvement.

This year, due to intensified market competition, the factory's technology is no longer leading, profit margins have begun to decline, and disputes over distribution have arisen again.

It was under these circumstances that Mr. Zhou was able to acquire the shares from the smallest shareholder.

"How much did you pay for 7% of the equity?" Yan Hui asked.

"Including market valuation, their company is now valued at 1800 million, so 7% of the equity would be 126 million. I spent 130 million to acquire those shares," Mr. Zhou said, sighing.

"You said the company distributed dividends of about 700 million yuan. Is that figure reliable?" Yan Hui asked.

"These are the data for 2006 and 2007. In 2006, they distributed 380 million in dividends, and in 2007, they distributed 300 million, totaling 680 million. This data is accurate. I reviewed their financial statements before buying the shares. I've been in this industry for so long, this definitely can't lie to me," Mr. Zhou said confidently.

“Under these circumstances, it’s actually quite good to still achieve an annual profit of over 300 million.” Yan Hui nodded.

“But this year there’s a big problem, otherwise this person wouldn’t have sold the shares. To be honest, I feel like I’ve been tricked. It’s not that the factory is bad, but this year, their two technical managers are considering leaving, which is a huge problem! I only recently found out why they were willing to sell the shares to me. When the factory started construction in the second half of 2005, they had already hired these two technical managers. They were both brought in from Foshan, and when they came, they signed a three-year contract, with a considerable amount of money and a hefty penalty for breach of contract. These two have indeed done a good job, and there haven’t been any problems in the past two years. However, when they wanted to renew their contracts this year, these two demanded a significant raise. I think such a raise is justifiable, but the others disagree. The profit margin is already low, and if we give two technical staff a huge raise, how will the company make money?” General Manager Zhou didn’t hide anything from Yan Hui.

The company is currently in a state of chaos due to this matter. The most outrageous thing is that there were previously 7 shareholders, but now there are 9, and two major shareholders have recently sold some of their shares.

If these two technical leaders don't reach an agreement by July, they will definitely leave. The factory can find replacements afterward, but no one can say whether they can maintain the previous quality. It seems that no one has much confidence, otherwise the major shareholder wouldn't have sold shares.

Take Yan Hui's current company, for example. Ask your brother-in-law and cousin if they would sell their shares. Of course not.

Shares of good companies cannot be bought at the normal price.

“I’ve been in this industry for quite a while now. I’ve spoken with the two shareholders, and they both agree to raise the salaries of the technical staff. The three of us hold a combined 27% stake. If we can acquire another 23% or more, or to be on the safe side, another 25%-30%, we can pass this resolution. Moreover, once our alliance achieves controlling ownership, I think sales will be much better, unlike before when we were a disorganized mess. I can easily buy another 5% of the shares myself; I just don’t know if Mr. Yan is interested. Think about it, the company can make money under these circumstances; once it’s truly on track, it will definitely be profitable!” Mr. Zhou explained his thoughts. He wanted to win over Yan Hui because he had heard about Yan Hui’s strength in the steel market and also knew that Yan Hui would have new sales channels.

Being a steel distributor and then selling tiles on the side—while not exactly a game-changer, it's certainly not that difficult.

"It's too chaotic, Mr. Zhou. I trust you; after all, we've known each other for so many years. But I haven't met your two friends, so I assume they can't be trusted. The four of us barely managed to gain control after acquiring a portion of the shares. How chaotic will the management be later? Shareholding is one thing, decision-making power is another. If there really is a capable person, even holding only 1% of the shares, they can still make decisions for the company. Obviously, there's no such person in this company; nobody respects anyone else. It'll be nothing but trouble later on." Yan Hui lost interest as soon as he heard this.

"I think this will take time. Given enough time, I believe we'll gain a stronger voice," said General Manager Zhou, still somewhat confident. "The key is to retain these two people now. Three years have passed; it's perfectly normal for them to ask for a raise!"

"Are you so confident that you can buy shares at a reasonable price?" Yan Hui didn't repeat the previous question and instead posed a new one.

"To be honest, I've been ripped off buying these shares. With such a small stake, I have absolutely no say. All the shareholders know that these two are leaving, so buying shares now shouldn't be difficult. I'm still somewhat unwilling to accept this." Mr. Zhou didn't know what else to say.

"Mr. Zhou, to be frank, I suggest that if a suitable person takes over, selling your shares at the original price would be a better option. I'm not qualified to offer advice on the development of your own factory, but I do have some experience with equity matters. If I really get involved, and the four of us do hold a controlling stake, and the company thrives, then what happens next? It will be extremely difficult to increase your shareholding. Easily bought shares are usually bad shares, and highly profitable shares are definitely unavailable." Yan Hui was quite blunt.

“Mr. Yan, you really should come with me to that factory first. To be honest, this factory is really undervalued, and the craftsmanship and the people are quite good. I think we should give it a shot,” Mr. Zhou said, but ultimately didn’t say anything more.

They're all smart people; that's about it. He's such a successful boss; he wouldn't just make investments like that.

"If someone were to offer an extra 10 yuan for your shares now, would you sell them?" Yan Hui changed the subject again.

"To be honest, I'll definitely sell! I should thank the buyer," Mr. Zhou said, suddenly losing his strength.

He suddenly realized that he wasn't actually driven enough or confident enough.

“In general, I won’t participate in such a chaotic shareholding structure,” Yan Hui shook his head slightly, thought for a moment, “unless I directly spend nearly 2000 million to buy the entire factory. If even one person’s shares are not sold, I will not buy it.”

"Huh?" Mr. Zhou was startled and pulled his hands back sharply, grabbing the armrests on both sides of the chair.

(QQ group 828500039, reposting)
(End of this chapter)