The Big Deal
"The Big Deal." "Quite impressive," Lee Hyuk-jae muttered as he stepped out of the car and gazed up at the ID Global Headquarters building. It was so tall that simply looking straight up wasn't enough to see the top; he had to crane his neck and lean back just to catch a glimpse of the skyscraper's summit.
"To think they built something like this on land that used to be full of shanties in Dogok-dong."
Dogok-dong was territory that even Choi Hyun-hee of the Ilseong Group had been eyeing. A proposal from Ilseong Corporation to construct a distinctive apartment complex on the empty lot south of Dogok Park had reached Chairman Choi Hyun-hee himself. The plan called for a mixed-use development combining commercial facilities like shopping malls with residential areas—a format common in the United States but still unfamiliar in Korea. Chairman Choi had shown interest, which naturally meant Lee Hyuk-jae had to make his move next.
While scouting the land, the ownership of plots across Dogok-dong had suddenly shifted to Yoo Jae-won, and construction of the ID Global Headquarters building had begun. Fortunately for Lee Hyuk-jae, Chairman Choi's attention had settled on a spot further south, adjacent to the Yangjae Stream, rather than the land south of Dogok Park. A mixed-use residential and commercial apartment complex scheduled for completion in 2000 was already under construction there—its name, Tower Palace.
When Tower Palace was first proposed, it was expected to become a towering landmark in the Dogok-dong area, the envy of all. Now, overshadowed by the 101-story building, it seemed destined to be remembered as merely an ordinary apartment complex. The thought left a slightly bitter taste. In Lee Hyuk-jae's view, if one wanted to build something truly groundbreaking, it had to be done like the 101 building. The people at Ilseong Group simply lacked that kind of boldness.
After lingering for a moment, lost in various reflections while studying the ID Global Headquarters, Lee Hyuk-jae headed toward the lobby. There, standing before the gleaming all-glass entrance, was someone he hadn't expected to see.
"Director Lee Hyuk-jae of the Planning Office, welcome to our headquarters."
"Chief of Staff Choi Kang-wook?"
Choi Kang-wook had come out to the lobby to wait for him. A flicker of surprise crossed Lee Hyuk-jae's face; he hadn't anticipated that Choi Kang-wook would personally come out to greet him.
"Yes. We've only spoken over the phone until now. This is our first time meeting in person, isn't it?"
Choi Kang-wook, fifteen years younger than Lee Hyuk-jae, offered his greeting first.
"It seems so. I should have visited you first to pay my respects, but I've been too busy to find the time."
Lee Hyuk-jae returned the greeting and produced his business card. They exchanged cards, and Lee Hyuk-jae's expression brightened slightly. After all, he had long carried the burden of knowing that the rift between Choi Hyun-hee and Yoo Jae-won had begun with his own carelessness. He had dismissed the younger man as insignificant, and now he was paying the price. That was why, when he had requested a meeting with Yoo Jae-won bearing a critical proposal, he had worried it might not even be granted. Fortunately, the extraordinary terms he offered had secured the appointment, bringing him here today. Yet he had never imagined that the second-in-command of ID Group would personally come out to receive him. As the second-in-command of Ilseong Group himself, the protocol, though modest, was being matched appropriately.
"Shall we go up? The Chairman is waiting."
"Yes, please lead the way."
Choi Kang-wook and Lee Hyuk-jae walked side by side through the lobby. The security screening process was not skipped. Only after passing through airport-style scanners were they allowed to board the high-speed elevator that went directly to the penthouse. As Lee Hyuk-jae ascended to the top floor of the 101-story building, his heart began to pound at the thought of finally meeting Yoo Jae-won.
What is this?
He was surprised by his own reaction. At well past fifty, he had thought his heart was long past racing over anything, yet now it thumped as it had in his youth. Lee Hyuk-jae was guided to the north living room. Even facing north, the space offered an unobstructed view of the Han River and the entire Seoul skyline. To maximize the vista, the north living room featured floor-to-ceiling glass—not simple thick panes, but specialized composite glass designed for climate control and safety. The very fact that there was a separate "north living room" indirectly indicated that Yoo Jae-won's penthouse contained multiple living rooms. In reality, besides the north living room, there were others facing south and east, and even one in the master bedroom. The residence was so vast that multiple living rooms could be created while still leaving ample space. Consequently, the north living room—and the entire north wing—had been designated for business use going forward.
"Chairman, Director Lee Hyuk-jae of Ilseong Group's Strategic Planning Office has arrived."
Yoo Jae-won, seated in a plush chair in the north living room working on a computer, rose when he saw Lee Hyuk-jae entering alongside Choi Kang-wook.
"Hello. I'm Yoo Jae-won."
He approached proactively, extending his hand for a handshake.
"I'm Lee Hyuk-jae, Director of Strategic Planning at Ilseong Group. It's an honor to meet you."
Lee Hyuk-jae shook Yoo Jae-won's hand and introduced himself briefly.
"Really?"
Yoo Jae-won asked playfully, his tone questioning whether the sentiment was genuine. Lee Hyuk-jae visibly flustered. People skilled at pleasantries often said things they didn't mean, and Lee Hyuk-jae was one of them. Teenagers or young people who idolized Yoo Jae-won might sincerely mean "an honor," but someone like Lee Hyuk-jae certainly did not. With that single short question—"Really?"—Yoo Jae-won had issued a clear warning: spare him the empty flattery in this meeting.
"Please, have a seat."
Yoo Jae-won gestured toward a plush seat for the momentarily speechless Lee Hyuk-jae, then took the chair opposite. Both seats were identical in height and design. While some might have resorted to petty power plays with seating arrangements, Yoo Jae-won had no interest in such childish tactics.
"I've been curious since yesterday—what exactly is this offer from Chairman Choi Hyun-hee that I supposedly can't refuse?"
He cut straight to the point the moment they sat down. He held no particular grudge against Lee Hyuk-jae; the man had vanished without a trace alongside Choi Hyun-hee's exit. That said, they weren't close enough to exchange pleasantries about building a future relationship either.
"Yes, then I'll explain."
Lee Hyuk-jae, Director of Strategic Planning, seemed to have adapted to Yoo Jae-won's tone and soon began speaking.
"The Chairman expressed a desire to repurchase the shares of Ilseong Group affiliates currently held by you, Director Yoo."
"Repurchase? The way you phrase it makes it sound as though I stole them."
"Not at all. That's not the meaning. Naturally, we'll offer a premium that satisfies you, Director Yoo."
This was precisely why the Ilseong Group found Yoo Jae-won so troublesome. He was a shareholder who properly exercised his rights. Under the banner of maximizing shareholder value, he had demanded thorough accounting audits, prevented company funds from being misused, and pushed for higher dividends. Korean listed companies were traditionally known for paying low dividends. After all, even Chairman Choi Hyun-hee personally held less than 5% of Ilseong Group's shares. Paying dividends would only give him 5% of the total. Add the substantial dividend income tax, and the amount shrank further. That was why Korea's chaebols preferred to use company funds as they pleased. Legal matters could always be handled internally. But with Yoo Jae-won's arrival, the situation had changed. Misusing company funds and covering it up with falsified documents constituted embezzlement. funneling work to subsidiaries amounted to breach of fiduciary duty. Already, more than ten of Chairman Choi Hyun-hee's close associates had been caught in Yoo Jae-won's net and sent to prison. Pressure for dividends had also been considerable. As a result, the cumulative dividends Ilseong Group had paid to Yoo Jae-won through 1996 exceeded one trillion won. Even as Ilseong Electronics earned substantial profits from memory semiconductors, Chairman Choi Hyun-hee felt a sense of loss watching the money flow to Yoo Jae-won, who simply sat idle. Unable to tolerate it any longer, Chairman Choi had apparently made the extreme choice of a block deal.
"Hmm. It's certainly an intriguing proposal."
Compared to his investments in major U.S. IT stocks, his stake in Ilseong Group was less than one-twentieth the scale. Although the stock prices of Ilseong Group affiliates had risen since his large-scale investment in 1992, the gains were modest compared to those in the United States. In Korea, land and apartments always took priority for investment, so even when companies posted strong earnings, stock investment remained lukewarm. Moreover, corporate accounting lacked transparency and dividends were stingy, making low preference for stocks inevitable. To illustrate, Ilseong Electronics' stock price stood at 30,000 won in 1992 and had only reached 60,000 won by 1996. Recently, however, the newly launched KOSDAQ had shown tremendous growth, rapidly increasing the number of retail investors.
"We'll pay 100% above the current market price."
One hundred percent? That meant paying 120,000 won per share for Ilseong Electronics stock—a substantial premium. It would take until the early 2000s for Ilseong Electronics to actually reach 120,000 won. Yet Yoo Jae-won's expression still held questions. If the premium was calculated at 100% of the current price, the cash owed to Yoo Jae-won would exceed roughly five billion dollars. He couldn't begin to guess where Chairman Choi Hyun-hee would come up with that kind of money. Ilseong Electronics had some cash on hand thanks to the memory semiconductor boom. But if they tried to use Ilseong Electronics' funds for the block deal payment, Yoo Jae-won would step in and object. It would be far better to distribute it as dividends instead.
"If Ilseong Electronics is the buyer, I refuse."
At Yoo Jae-won's words, Lee Hyuk-jae smiled as though he had expected this.
"The entity purchasing your shares will be Ilseong Motors. Ilseong Life Insurance will guarantee the transaction."
Ilseong Motors and Ilseong Life Insurance. The moment Yoo Jae-won heard those names, he immediately sensed that this deal was not merely about securing equity. Ilseong Motors was the throne prepared for the crown prince. The succession process, previously stalled by Yoo Jae-won's massive holdings in Ilseong Group affiliates, was now proceeding again with Ilseong Motors at the center. Ilseong Motors had already acquired stakes in Ilseong Group affiliates through stock swaps with Ilseong Life Insurance. Originally, management rights over Ilseong Life Insurance belonged to an amusement park and resort company called Nature Farm, whose owner was none other than Chairman Choi Hyun-hee, allowing him to exercise control over the entire Ilseong Group. Now, a significant portion of that control had shifted to Ilseong Motors, and if Yoo Jae-won's Ilseong Group shares were added on top, the owner of Ilseong Motors could become the owner of Ilseong Group itself. Of course, this was still a leap in Yoo Jae-won's mind. But his instincts had never been wrong before.
"Hmm. Does Ilseong Motors even have that kind of money? I was under the impression they're still operating at a loss."
"Thank you for your concern. However, this is a matter for the Ilseong family to resolve, so you needn't worry, Director Yoo."
Lee Hyuk-jae wore a confident expression as he addressed Yoo Jae-won's question. A flicker of irritation rose within Yoo Jae-won. The man was acting as though Ilseong Group's capital was his own. This was what people called "interviewer syndrome"—after serving long enough as an interviewer in HR, one begins evaluating others as if they were the company's owner. Yoo Jae-won had witnessed such behavior firsthand at his own company. About two years ago, when turnover in one team had been unusually high, an investigation revealed that a team leader suffering from interviewer syndrome had been making life miserable for his subordinates. The man was merely a team leader, yet his conduct was that of a Korean subsidiary president. Upon receiving the report, Yoo Jae-won had naturally fired him. The performance achieved by grinding down the team members wasn't particularly outstanding compared to other teams. In fact, the initial burst of efficiency had never been fully realized because of the frequent departures.
In any case, Lee Hyuk-jae's demeanor evoked no goodwill from Yoo Jae-won. He could simply reject the proposal outright. But the foreign exchange crisis looming in a few months weighed on his mind. During the crisis, Korea's stock market would be devastated. Accepting the premium now and buying back the shares during the crisis would be the wiser course. Yoo Jae-won made up his mind. Instead, he decided to add conditions, irritated by Lee Hyuk-jae's increasingly smug attitude now that he thought the atmosphere had warmed.
"Very well. But make the payment in U.S. dollars."
"Dollars, you say?"
"ID Group's primary stage of operations is the United States. Receiving it in won would only mean unnecessary double conversion—it's inconvenient."
"Understood."
Lee Hyuk-jae accepted immediately, as though he had anticipated this much. But Yoo Jae-won wasn't finished.
"And a 100% premium isn't quite enough."
"What? How can 100% be insufficient?"
"For Ilseong Electronics alone, 100% might be acceptable, but the other affiliates haven't grown as much as Ilseong Electronics. Some have even declined. So let's make it 120%."
Yoo Jae-won demanded an additional 20%. Though it sounded modest at first, given the scale of his Ilseong Group holdings, even 20% amounted to hundreds of billions of won. Lee Hyuk-jae hesitated for a moment.
"Surely you didn't come here without the authority to decide even this much?"
"Of course not. As I mentioned over the phone, I have full authority. However, with these additional terms, I will need to consult the Chairman."
Full authority, yet he still needed to make a call. Still, it wasn't something Yoo Jae-won couldn't accept.
"Fine. In exchange, tell him I'll accept about 30% of the total payment in corporate bonds—Ilseong Electronics corporate bonds, that is."
"Corporate bonds?"
Lee Hyuk-jae brightened at Yoo Jae-won's words. After all, corporate bonds were essentially IOUs—promises by the company to repay borrowed money later. They offered higher interest rates than commercial banks, though they carried greater risk than government bonds due to varying credit ratings. They were safer than direct equity investments, however. In the event of bankruptcy, stocks became worthless, but bondholders retained their rights until the company was fully liquidated. From Ilseong Group's perspective, it meant they wouldn't have to pay cash immediately, further reducing the burden of the block deal.
"Of course, the bonds must also be issued in dollars."
Despite the additional condition, the discussion progressed rapidly. After confirming all terms, Lee Hyuk-jae stepped outside to report to his superiors and make a phone call.
—That young fellow is being awfully picky with his conditions. But my back's against the wall, so what choice do I have? I'll accept. In the meantime, make sure you thoroughly investigate whatever he's plotting!
Though grumbling about Yoo Jae-won's conditions, Chairman Choi Hyun-hee ultimately agreed. Thus, the largest block deal in Korean business history was concluded. The deal was only made public after the legal teams of ID Group and Ilseong Group had prepared proper contracts and Yoo Jae-won and Choi Hyun-hee had signed them. That day was January 6, 1997, and the media rushed out breaking news declaring it the largest block deal in history. At the same time, they speculated excitedly that the cooperative relationship between ID Group and Ilseong Group would deepen even further through this big deal.
But to Yoo Jae-won, this was hardly a "big deal" at all. The truly massive transaction was unfolding elsewhere.
—Hey, buddy, have you decided on the biggest business deal on earth? Don't tell me you're putting it off again?
The cheerful voice came through the mobile phone. It was Ted Turner, Vice Chairman of Time Warner.