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Chapter 278 Acquisition of Samsung

In 1997, Asia was as if shrouded by an invisible financial monster. The shadow of the financial crisis spread like spilled ink, quickly staining the entire Asian economic landscape.

The once bustling market has become lifeless. Panic and despair, like a highly contagious flu, are spreading wildly through various economies. Wherever they go, businesses collapse, stock markets plummet, and even the air is filled with the acrid smell of evaporating money.

Amidst this gloomy atmosphere, South Korea, a country that once shone brightly on the Asian economic map thanks to the Han River miracle, could not escape the clutches of this storm.

The Korean won plummeted in the exchange rate market like a kite with a broken string, turning the once-strong currency into worthless paper.

The stock market was even more disastrous, with the main index plummeting like a glider, and investors' wealth evaporating in a very short time, with cries of despair echoing everywhere.

Businesses are facing unprecedented difficulties. Broken capital chains are like a curse haunting many companies, and non-performing assets in banks are piling up like a volcano that could erupt at any moment. The entire country's economy is on the verge of collapse, as if one foot has already stepped into the gates of hell.

Samsung Group, a pillar of the South Korean economy, was not spared from the crisis and suffered a heavy blow.

Despite being the most resilient and lowest-debt company among all South Korean conglomerates, Samsung's debt still reached a staggering $120 billion, with its debt ratio soaring to 236%.

This number is like a mountain, pressing down on Samsung and making it hard for them to breathe.

The main reason for this is the sharp devaluation of the Korean won.

If you borrowed $1 from someone, you could have paid it back with just 1000 Korean won. But now that the Korean won has depreciated, you need 2000 Korean won to exchange for $1. This means that the dollar debt you owed in the past now requires twice the amount of Korean won to pay. This has effectively doubled Samsung's debt, making it even worse than usury.

The sharp drop in the South Korean stock market only made matters worse, undoubtedly dealing another blow to Samsung's financial situation.

Without the devaluation of the Korean won and the sharp drop in stock prices, Samsung, with its own strength, could have easily kept its debt ratio below 100%, or even around 60%, avoiding the embarrassing situation of insolvency and the current predicament.

Jane Fraser recognized this point, which is why Ernst successfully persuaded her to quickly assemble a team of elites from various fields, including economists and financial experts.

Using complex mathematical models and advanced quantitative analysis methods, a meticulous study of Samsung was conducted, providing strong support for the subsequent acquisition.

The atmosphere in the conference room of Ernst Asset Management was tense yet tinged with excitement.

After listening to Jane Fraser's analysis of Samsung's current situation, Bai Wen Houston, the head of the asset management department, carefully reviewed a report that his team had just submitted. A hint of barely concealed excitement flashed in his eyes. "Samsung Group is currently in deep trouble and urgently needs a large amount of funds to alleviate the crisis. That's a certainty. Now it's just a matter of how much and how we invest. I think we can hold a large number of shares."

Jane Fraser placed her fingers interlaced on the table, turned sharply to look at Pervin Houston, and calmly said, "Tell me your reasons."

Parker Houston glanced at the report in his hand a few more times, then solemnly put it down. "Samsung is an iconic company in South Korea, without a doubt. It has a vast industrial system, covering almost all sectors of the South Korean economy, from electronics to auto parts, which is very important."

"Unlike other South Korean conglomerates that are heavily indebted, I believe that if the South Korean government must protect a conglomerate, it must be Samsung."

"Because Samsung is involved in so many fields, if it collapses, it will be a major blow to almost all industries in South Korea."

"Moreover, Samsung possesses advanced technology and is competitive in many areas of the global market, which is a real strength."

"Moreover, the South Korean government itself is struggling to survive. Faced with this sudden financial crisis, the government is busy stabilizing the domestic economy and rescuing numerous companies on the verge of bankruptcy. Where does it have the energy to worry about foreign capital taking control of their core companies?"

"Under these circumstances, if we can inject capital at this time, the scrutiny will be minimal, and Samsung and South Korea will certainly welcome our investment. Once the South Korean economy recovers and Samsung rises again, our investment will undoubtedly yield unimaginable returns."

At this point, Pervin Houston pointed to the report on the table and added, "Of course, we cannot ignore the problems that Samsung currently faces."

"The report shows that in addition to the impact of the overall economic environment, Samsung's predicament is also due to many internal problems, such as chaotic production management, mountains of inventory in the workshops, and a large number of unsold products in the warehouses that cannot be converted into cash flow."

"In addition, external market demand has shrunk dramatically, consumers are holding onto their money and are unwilling to spend easily, and Japanese competitors are taking advantage of the situation to squeeze Samsung's living space in the market."

Perkin Houston suddenly changed the subject, saying, "But these problems are temporary for Samsung. As long as this financial crisis ends, the Asian economy begins to recover, consumer purchasing power recovers, and market demand increases, Samsung will not only rise again, but will become even stronger, thanks to its own strength and the reputation it has built up over the years."

Jane Fraser listened to Pervin Houston's analysis, glanced at him, and couldn't help but chuckle inwardly; many of his points coincided with Ernst's.

She sat up straight, revealing her decisive side, and said firmly, "Then this time you will be in charge of contacting Samsung, and you will have full authority to decide the amount of investment."

Efficiency and speed are the core management philosophies of Ernst Asset Management.

At the company, once a decision is made, we act immediately without any hesitation.

At 5 PM Eastern Time, which is 8 AM Korean Time, while South Korean office workers were still struggling to get to work on crowded subways, Ernst Asset Management's acquisition offer was already neatly placed on Samsung Group's desk.

In the Samsung Group headquarters building in Seoul, South Korea, the atmosphere in Lee Kun-hee's office was so heavy it seemed like water could drip from it.

Samsung Group Vice Chairman Lee Hak-joo, Samsung Electronics CEO Yoon Jong-ryong, Shinsegae Department Store Vice Chairman and Lee Kun-hee's sister Lee Myung-hee, and others gathered here. Everyone's face was filled with anxiety, and the air was thick with tension.

Lee Hak-joo broke the silence first, reporting to Lee Kun-hee with a serious expression the grim situation the company was facing and the news that Ernst Asset Management Company intended to inject capital.

Lee Hak-joo's voice carried a hint of weariness. "Chairman, many of the company's projects have had to be suspended due to a lack of funds, and the employees' morale is also very unstable."

"Ernst Asset Management has expressed its intention to invest in us. They hope to acquire 20% of Samsung Group's shares at a price of 1000 won per share and demand two seats on the company's board of directors."

After a pause, Lee Hak-joo added, "However, they also seem to be very interested in Samsung Electronics and Shinsegae Department Store, and in addition to investing in the Samsung Group, they also hope to acquire 10% of the shares of each of these two companies separately."

"1000 won? This is outrageous!" Before Lee Kun-hee could speak, Lee Myung-hee, after hearing Lee Hak-joo's report, could no longer contain himself and slammed his fist on the table in anger.

She loudly vented her dissatisfaction, "Moreover, if we let them into the board of directors, our decision-making power will be greatly restricted, and many of the company's decisions will be subject to their control. This is absolutely unacceptable."

Looking at the angry Li Mingxi, Li Hezhu had a helpless expression on her face. "I also think their conditions are too harsh, but we really don't have many options right now. The company's cash flow is extremely tight. If we can't get the funds as soon as possible, we may not even be able to pay our employees' salaries next month."

"More importantly, the company has a large amount of maturing foreign debt. If it cannot repay it on time, it will face the risk of defaulting on its debts. Once a debt default occurs, it will deal a devastating blow to Samsung's reputation, with unimaginable consequences."

"At that point, let alone the company's development, it will be questionable whether we can even preserve the Samsung brand."

Silence fell in the office again, and everyone's eyes were focused on Lee Kun-hee.

Lee Kun-hee frowned, lost in deep thought.

He was well aware that accepting investment from Ernst Asset Management was like drinking poison to quench thirst. Although it could solve the immediate problem, it would also cause Samsung to lose some control, and its future development might be subject to others in every way.

However, if they refuse, defaulting on their debts and going bankrupt is certainly impossible for Samsung, but whether they can continue to develop is uncertain.

Decades of hard work would be destroyed in an instant, something he absolutely did not want to see.

After a long pause, Lee Kun-hee slowly raised his head, his eyes filled with determination. "Notify the legal department and the finance department to take immediate action and carefully study Ernst Asset Management's capital injection plan to see if there is room for negotiation and if we can secure more favorable terms."

"At the same time, we also need to find ways to raise funds domestically. We cannot place all our hopes on the Americans; their investment is merely a backup option for us."

At this point, Lee Kun-hee looked at Lee Hak-joo again and asked, "What about government funding?"

Li Hezhu quickly replied, "Chairman, we have received news from the government that the loan we applied for will arrive soon. This funding can temporarily alleviate our financial pressure."

"But government loans can only solve the immediate problem. To truly get out of this quagmire and get out of the current predicament, we still have to rely on ourselves."

Lee Kun-hee certainly understood this principle, so when the financial crisis first swept through South Korea, Samsung had already keenly identified the problem and quickly initiated a self-rescue mode.

Two months ago, Samsung began a large-scale reform, including cutting expenses and selling equity in some non-core businesses.

However, the results were only somewhat effective, not ideal.

Through internal reforms, the company's operating costs have been significantly reduced and efficiency has been improved; this is a form of cost reduction.

However, in terms of open source, both market expansion and selling equity have been extremely difficult.

Everyone knows that the Asian financial crisis has broken out, and prices are being driven down to rock bottom. In comparison, Ernst Asset Management's opportunistic profiteering seems quite sincere.