Merger Proposal (4)
The court threw out Elliott’s application for an injunction blocking the sale of Hanjeong Mulsan’s treasury shares.
Hanjeong Mulsan sold every last one of them as planned, and the transaction was carried out through a share swap. That gave Hanjeong Mulsan another 5.5 percent in friendly stakes, enough to let them breathe a little easier. If they could just secure the National Pension Service’s vote, they would have the merger in the bag.
The Hanjeong Group threw everything it had at persuading the Blue House and the political establishment. Chairman Ju Min-jae even met the president privately on the sidelines of a business leaders’ gathering.
The Strategy Office chief, Park Un-yong, took command of the merger plan. He lobbied reporters, monitored every article that came out, and mobilized employees to flood portal sites with posts supporting the merger. If any anti-merger post appeared, they were instructed to pile on with comments or report it until it disappeared.
The alliance on the other side wasn’t sitting still, either.
It worked to persuade investors, gathered friendly stakes wherever it could, and waged a full-scale public opinion campaign. Still, it couldn’t overcome the media ties Hanjeong Mulsan had spent years building.
Whether because of all that promotion money or not, public opinion had clearly begun leaning toward Hanjeong Group. When Ju Hyeon-jin heard the news, he burst out laughing.
“Ha! They barged in without knowing their place, and now look at them.”
Park Myeong-hun spoke carefully.
“It’s too early to relax. There are still the retail shareholders’ votes.”
“What the hell can those bastards do? If we just tell them the stock’s going to surge after the merger, they’ll all sit on their hands.”
In principle, anyone who owned even a single share could exercise voting rights at the shareholders’ meeting. But most retail investors had little interest in voting. All they wanted was for the stock price to go up.
“That may be true, but there’s still a chance they could move in for more buying.”
“The stock’s already more than doubled. At this point, how much more can they possibly buy?”
“Fair enough.”
Right now, even small purchases were enough to send the share price climbing sharply. The more they bought, the higher the entry price rose, so there had to be a limit to how much more they could accumulate.
“But something feels off.”
“What does?”
“The trading volume is too low.”
“That’s just because individual investors aren’t selling. They’re expecting the price to keep rising.”
“Even accounting for that, the drop in volume is strange.”
Hanjeong Mulsan’s trading volume kept hitting new lows day after day. The trading had slowed so much that the quotes would sometimes sit frozen for a full minute at a time.
Park Myeong-hun was worried, but Ju Hyeon-jin didn’t seem to care.
“You always worry too much. Is that because you take after your father?”
Park Myeong-hun’s father was Park Un-yong, the chief of the Strategy Office. He was the same age as Ju Hyeon-jin, and from childhood he had naturally fallen into the role of serving him.
“Anyway, we need to be as careful as possible until the merger is finished. That was ordered directly by Chairman Ju.”
I ran the numbers again.
The Elliott–KSGI alliance held 19.1 percent. The Hanjeong Group side had 10.6 percent from the controlling family and relatives, plus another 5.5 percent from the treasury-share sale. Add in the friendly stakes and the National Pension Service’s 9.9 percent, and the total climbed to roughly 40 percent. Once you excluded the institutions, there were about 25 percent of the shares still left in the market. In reality, though, more than a third of that was already in our hands.
Senior Dongho said, “At this trading volume, they’re going to realize something’s wrong before long.”
“Probably.”
The board had already been set. Now it was time to start moving.
Sara said, “Isn’t that still not enough?”
I nodded.
“First, we need to keep the National Pension Service from exercising its vote. And we need to bring over the retail shareholders’ votes, too.”
Right now, retail shareholder sentiment mattered. The problem was that Hanjeong Group was swallowing those votes faster than we could move.
Hanjeong Group had mobilized every employee it had, and it was even asking domestic securities firms to help, scraping together proxy forms as if it were pulling teeth. If that trend continued, it would be bad news for us.
If Hanjeong Group secured enough votes to push the merger through, our stake would stop mattering. So we had to block the National Pension Service’s vote and shift the retail shareholders to the other side.
Sara said, “That’s not exactly easy.”
I nodded again.
“We need to make it clear that the controlling family has serious problems with the way it runs the company.”
“Every newspaper seems to be on Hanjeong Group’s side. Do you actually have a way to do that?”
Her big eyes were shining, as if she were eagerly waiting to see what trick I’d pull out of my sleeve. She looked less like a watchdog than a spectator.
Luckily, I already had a plan.
“I’m going to meet someone first.”
Private equity really began to take off in Korea after the Indirect Investment Asset Management Act went into effect in December 2004. The industry was still young, but even in that short span, a number of exceptional investors had emerged.
If I had to name the most famous among them, there were three.
First, naturally, was Kang Myung-guk, chairman of MKK Partners. A former head of KannaNine Group, he was a celebrity not just in Korea but around the world. The MKK Partners he founded after leaving KannaNine Group was, by domestic corporate ranking, number five, and by private equity standards, the largest in all of Asia.
The second was Park Tae-il, the man who created Primus Fund and helped bring private equity into the mainstream. Unfortunately, thanks to a whistleblower from one rookie employee, Primus Fund was exposed as a fraud, and Park Tae-il was now under arrest and on trial.
And the last was Kim Sung-gwun, the man who had effectively founded KSGI, Korea’s first activist hedge fund.
I contacted KSGI and said I wanted to meet Kim Sung-gwun. A place like KSGI stood above most conglomerate groups, and the man running it wasn’t someone I could meet just because I asked. If that hadn’t worked, I’d planned to try someone else for help, but to my surprise, I got a reply saying he would see me right away.
KSGI occupied three floors of a thirty-story building on Teheran-ro. It wasn’t far from Continue Capital’s branch, so I could get there on foot without any trouble.
Speculative Capital, Get Out!
Outside the building, protesters had hung a banner and were handing out flyers. Their message was simple: Hanjeong Group must never fall into the hands of speculative capital.
Led by a staff member, I went inside.
Kim Sung-gwun’s office wasn’t all that large. That alone seemed to reflect a personality that valued substance over appearances. Still, the view was excellent, looking out over the whole of Gangnam.
When I stepped inside, the man in the room got to his feet.
He looked to be in his late forties, small in height and slight in build. He wore silver-rimmed glasses, and his hair was combed neatly into a tidy side part. At a glance, he looked like an ordinary office worker you could find anywhere.
But the truth was that he was a private equity heavyweight who could move trillions of won with nothing more than a gesture.
He extended his hand.
“Welcome. I’m Kim Sung-gwun.”
I shook it.
“I’m Han Miru. I know you’re busy, so thank you for making the time.”
“I’m sorry, but I have another appointment, so I can only spare about twenty minutes.”
“That’s more than enough.”
Kim Sung-gwun smiled.
“I was actually a little surprised when I heard you wanted to meet. I’ve wanted to meet you myself for quite a while.”
“Me?”
“I was curious who it was that exposed the Primus Fund mess.”
It had all happened in the same industry, so he was probably familiar with the whole story. Apparently, that incident had made me fairly well known, too.
After the greetings were over, we sat down.
“I had a hunch something was off,” he said. “But I never imagined they’d be hiding that level of rot. How did you find it?”
“I got lucky.”
I brushed it off the same way I usually did with other people, but Kim Sung-gwun looked genuinely impressed.
“Most people would have let information like that pass them by. It’s not common to find someone with that kind of insight.”
As he spoke, he kept his eyes fixed on my face. He seemed to be studying me, curious about who I was.
Then he asked, almost as a joke, “So what brings you here? Are you looking for a job?”
“If I was, could you hire me?”
Kim Sung-gwun nodded without hesitation.
“Of course. I would.”
That answer caught me off guard.
KSGI was one of the top three names in Korea’s private equity industry. For anyone who dreamed of becoming an investor, it was no exaggeration to call it a dream job. Naturally, they didn’t hire just anyone. Even to get in as a junior employee, you needed outrageous credentials and experience.
“Do you really think I’m qualified to work at KSGI?”
Kim Sung-gwun smiled as if he were joking.
“Don’t worry. If you’re not qualified, you won’t last, and you’ll end up leaving on your own.”
Come to think of it, the private equity world wasn’t soft enough to let someone unqualified sit in a chair and stay there just because they wanted to. If I’d received an offer like that while I was still at DA Securities, I would’ve accepted it without a second thought.
“I appreciate the offer, but that’s not why I came today.”
“That’s a shame.”
His face suggested he wasn’t just being polite; he really was disappointed.
“Then what did you come for?”
“I had a few questions.”
“What kind of questions?”
“Do you think you can stop the merger between Hanjeong Mulsan and HJ Logics?”
It was pretty rude to ask something like that on our first meeting. Even so, Kim Sung-gwun didn’t show any irritation; instead, he just smiled.
“Why are you asking?”
“Let’s just call it curiosity for now.”
“The merger will fall through.”
From his point of view, that was the only answer he could give.
“Really? If you count the shares that actually show up at the shareholders’ meeting, then with about 80 percent attendance, the merger proposal can pass with just 55 percent of all outstanding shares. If the National Pension Service votes in favor, Hanjeong Group will have enough votes to get it through.”
He couldn’t possibly be unaware of that.
That was why he had sent the National Pension Service a letter asking it to vote against the merger, and why he had also appealed directly to retail shareholders. Even so, the situation was clearly tilting against them.
“Are you saying KSGI is going to lose at the shareholders’ meeting?”
I looked at Kim Sung-gwun.
Contrary to his small frame and mild-looking face, his eyes were those of a predator.
The financial markets were nothing more than a gladiator arena where people fought with their lives on the line. Capital battled capital in fierce competition for money, and sometimes it joined hands and worked together when it suited its interests.
To survive in a place like that, you needed cold-blooded analytical skill and bulldozer-level execution.
Everyone in this business was like that in one way or another, but Kim Sung-gwun was especially famous for his instinct as a fighter.
He devoured companies with everything he had, like a lion bringing down its prey.
That was how KSGI had made its name as an activist hedge fund.
This kind of strategy could be a jackpot when it worked, but the risk was no joke when it failed. In the first timeline, it had failed and cost billions of won in losses.
But this time, because I was involved, the situation had changed.
“No. The opposite.”
“The opposite?”
I smiled.
“KSGI will win. We won’t even need to go to the shareholders’ meeting.”