The Merger Standoff
Time Warner Center, located at the southern edge of Central Park in Manhattan, New York, was the place where Yoo Jae-won would face his first real confrontation. Manhattan already housed the ID Flagship Center and the headquarters of ID Investment, both not far from Time Warner Center. Though he had visited the area multiple times before, he had never truly registered the building—until now. The thought that it might soon become part of the same family left him feeling slightly excited on the way over. Yet the moment he arrived, the impression it gave was different from what he had expected.
Time Warner Center consisted of a shopping mall complex at the base, topped by two identical twin towers. The sight of those towers somehow soured his mood. The mall itself was ordinary, but the two buildings rising above it felt off. Tracing the source of that discomfort, he realized the shape reminded him of the Ilseong Group headquarters—not the current building, but the new headquarters under construction. The resemblance was not exact, but the feeling was close enough. Since Ilseong was a name that made Yoo Jae-won grind his teeth, a trace of that hostility had apparently transferred to Time Warner as well.
What is this?
It was unprecedented for a first visit to leave him in such a foul mood. Still, he chalked it up to unconscious stress ahead of an important meeting and brushed the feeling aside. As expected, Time Warner’s reception team was waiting at the entrance. The moment Yoo Jae-won stepped out of the car, he was greeted with lavish hospitality and escorted straight to the chairman’s office, where he began his meeting with Gerald Levin, Ted Turner, and the rest of Time Warner’s senior executives.
Gerald Levin was an older man whose stubborn eyes matched his rigid face. White strands had begun sprouting among his brown hair, and his mustache was more white than black.
“Welcome. I’m Gerald Levin, CEO of Time Warner.”
His greeting was polite but stiff. Even the handshake lasted only two perfunctory pumps before ending.
“Haha! It’s been a while since we met in person, hasn’t it?”
Ted Turner, seated right beside him, went so far as to pull Yoo Jae-won into a hug, making a show of their friendship for the other Time Warner executives. Of course, Ted Turner simply did not care about appearances—he was genuinely glad to see Yoo Jae-won.
“Hello. I’m Yoo Jae-won. This is Remington Sting, Vice Chairman of ID Group. Once the merger is on track, he will handle the practical work on our side.”
“Remington Sting, Vice Chairman of ID Group. I look forward to working with you.”
Yoo Jae-won’s courteous introduction produced a strong reaction from the Time Warner side. Every executive present was at least twice his age and accustomed to younger employees groveling before them. Yet Yoo Jae-won showed not a hint of subservience. That alone felt refreshingly novel. The fact that even Vice Chairman Remington Sting treated Yoo Jae-won with such deference made the scene even more unfamiliar to them.
Then the recent Wall Street report on ID Group’s asset size came to mind. While preparing for the merger, Time Warner had commissioned various consulting reports. One figure had been particularly shocking: ID Group’s total assets were estimated at five to six times Time Warner’s current market capitalization. Even Nextcomcast alone was reported, depending on the valuation method, to have a larger market cap than Time Warner.
After the introductions, both sides took their seats and the real discussion began. Ted Turner spoke first, enthusiastically painting a rosy future for the combined Time Warner and Nextcomcast. Yoo Jae-won listened quietly. The more he heard, however, the stranger it felt. Ted Turner was not explaining the rationale for the merger to Yoo Jae-won—he was addressing Gerald Levin and the other Time Warner executives, as if trying to persuade his own side.
Despite the odd feeling, Yoo Jae-won chose to remain silent for now. While it was his habit to raise questions the moment something felt off, he judged that watching a little longer would be wiser. Besides, Ted Turner’s vision contained nothing particularly concrete—nothing beyond what anyone else could have imagined.
Interestingly, while Ted Turner spoke with great passion, Gerald Levin’s expression remained lukewarm. In contrast, COO Richard Parsons listened intently.
Hmm.
Time Warner had grown through repeated mergers, and its leadership was a collection of the top executives from those acquired companies. It was only natural that their opinions diverged. Clearly, Ted Turner had been the first to push for this merger, with Richard Parsons lending his support. Gerald Levin, on the other hand, had shown little interest.
Yoo Jae-won’s assessment proved correct. The moment Gerald Levin finally opened his mouth after Ted Turner had set an enthusiastic tone, the atmosphere turned cold.
“Then allow me to present the merger structure we have in mind. To be direct, Time Warner does not possess the enormous capital required to purchase Nextcomcast’s management rights outright. Therefore, we would like to propose an entirely new approach to the merger.”
Though Gerald Levin spoke in a humble tone, the proposal itself carried no humility. As Yoo Jae-won had expected, the idea of combining Time Warner and Nextcomcast’s assets to create a new merged company was identical. What differed was how the management rights of that new entity would be divided.
“We propose a 6:4 equity split for the merged group. In exchange, we will guarantee management rights over each party’s original organizations.”
The 6, of course, belonged to Time Warner; Yoo Jae-won’s share was 4. In other words, he was being told not to even dream of overall control of the merged group. Meanwhile, they would generously grant him management rights over the Nextcomcast portion. Yoo Jae-won felt an immediate urge to walk out. At this point, it was obvious that Gerald Levin had no real desire to merge at all. Yet after crossing the North American continent, simply leaving empty-handed felt like too much of a waste.
“6:4? What is the basis for this ratio?”
Yoo Jae-won kept his voice calm and his expression neutral as he asked.
“Naturally, it is based on current asset values. Time Warner’s market capitalization closed at $69 billion yesterday.”
Nextcomcast, being delisted, had no precise market cap. Gerald Levin therefore cited a Wall Street analyst report that valued Nextcomcast at $50 billion.
“Strictly speaking, the ratio should be 6.5:3.5, but we have raised your share to 4 out of respect for your ability and vision. We are also prepared to show goodwill in the naming of the new entity.”
“Goodwill?”
“We will place Nextcomcast’s name first when deciding the merged company’s name.”
He spoke as though granting a favor, but Yoo Jae-won found the entire claim increasingly absurd. The most ridiculous part was that Gerald Levin had valued Time Warner using its inflated closing price while valuing Nextcomcast solely on a conservative Wall Street report.
“This is ridiculous.”
The Korean words slipped out before he could stop them. It was a mistake he should never have made, yet the sheer absurdity of the proposal was enough to make even someone with Yoo Jae-won’s mental discipline nearly curse aloud. Because it was Korean, Gerald Levin did not understand the words, though the tone made his expression darken slightly.
“I beg your pardon?”
“Ah, I was saying I cannot accept your calculation method, Chairman Levin.”
After all, Time Warner’s current stock price had become heavily inflated by the merger rumors. Yoo Jae-won often spoke of the IT boom when discussing U.S. stock prices—the phenomenon of any company with “tech,” “com,” “net,” or “work” in its name seeing its stock rise had begun in America before spreading to Korea. The IT sector had become the sole promised path to a golden 21st century. Time Warner, long left out of that boom, had finally dipped a toe into the IT sector with this merger announcement, triggering a record surge that pushed its market cap to $69 billion. It was a price bloated with bubbles. In contrast, Nextcomcast’s value had been deliberately understated. Every asset had been valued conservatively, with no bubble whatsoever. If placed on the open market, buyers would have filled an entire stadium and still been left wanting.
“Then what method do you have in mind, Chairman Yoo?”
Gerald Levin straightened his previously leaning torso, his gesture openly displaying discomfort and wariness.
“I agree with establishing a merged company and dividing equity. That way we can combine our strengths and create powerful synergies.”
Yoo Jae-won began speaking with the same assertive posture Gerald Levin had adopted.
“However, the valuation method for both companies must be the same. There is nothing more absurd in a merger than applying different standards to each side. Whether through due diligence or market capitalization, both companies must be evaluated using the identical approach.”
“If we are to use market capitalization as the standard, then we should calculate ours the same way.”
“But Nextcomcast is a private company, is it not?”
“Then we simply list it again.”
Yoo Jae-won spoke as though relisting was a trivial matter. A crack appeared in Gerald Levin’s expression. Time Warner’s intelligence had indicated that Yoo Jae-won was extremely reluctant to list any of his companies. Even after Android’s listing, countless investment firms had urged him to go public, yet he had not budged. They had built their merger strategy around that assumption, so Yoo Jae-won’s unexpected response made his eyes waver.
“If you begin preparing for a listing now, it will take considerable time, will it not?”
“Chairman Levin seems rather eager to complete this merger quickly. Unfortunately, I have no problem waiting two years if necessary.”
“Hmm. That timeline is somewhat problematic for us.”
“Well, it is not for me. Given the significant differences in our positions, further discussion seems unlikely to produce progress. Please contact me if your thinking changes.”
With that, Yoo Jae-won rose from his seat. Richard Parsons COO looked as though he wanted to speak, but Yoo Jae-won merely gave a slight bow and left. Even Ted Turner, who had remained unusually quiet after his initial display of presence, shot Gerald Levin a brief glare before standing as well. He seemed both apologetic toward Yoo Jae-won and eager to say more.
The very next day—
Economic media outlets and television news alike were filled with coverage of the negotiations between Yoo Jae-won and Gerald Levin. The fact that Yoo Jae-won had left Time Warner Center after less than an hour and returned directly to San Francisco spoke volumes. Moreover, Ted Turner, who loved speaking to the press, had freely recounted what had transpired in the meeting room, leaving little doubt that the merger had hit serious trouble.
The stock market reacted first, as always. Time Warner’s shares, which had soared on merger speculation, began a rapid freefall. In a single day, $11 billion in market capitalization evaporated. The decline showed no signs of stopping even days later. As a result, Time Warner’s stock price fell even lower than before the merger rumors had begun.
“The shareholders are furious. The board’s discontent is no joke either. If the negotiations truly collapse, Gerald is finished.”
Ted Turner was quick to relay Time Warner’s internal situation. Since it was well known that Gerald Levin and Ted Turner were bitter rivals, he seemed to take particular satisfaction in Gerald Levin’s predicament. After all, Ted Turner had been the first to conceive of merging Nextcomcast and Time Warner, and he had secured board approval, making him more invested than anyone.
“I’ll bet my entire fortune that Gerald will call you within three days!”
He made the bold prediction with absolute confidence. Fortunately, Yoo Jae-won did not have to worry about feeding Ted Turner. Exactly three days after Ted Turner’s call, Time Warner reached out again. This time it was Gerald Levin himself, saying he wanted to negotiate in earnest.