Third-Party Allocation Capital Increase (6)
Once the matter had been dragged into the open by the media, the Korea Development Bank and Hanjeong Mulsan moved quickly to force the merger through.
Despite shareholder opposition, Vice Chairman Ju Cheol-jin announced that he would go ahead with the capital increase.
There was no need to even reach the shareholder meeting; it already felt as though the three-way alliance had all but lost, and the stock kept sliding.
Then, at that very moment, an utterly unexpected variable appeared.
Hwaan Group was the seventh-largest conglomerate in the country.
But in construction alone, it lagged behind even mid-sized builders. Unlike the big-name firms that dove into massive redevelopment and land development projects, it barely kept its numbers afloat by taking orders from its affiliates.
And now this company was stepping forward and saying it would acquire Daejun Construction, a firm whose market cap was at least five times larger.
In an interview with the press, Hwaan Construction CEO Huh Cheol-won said, “Through the acquisition of Daejun Construction, Hwaan Construction will be reborn as a world-class construction company.”
The reporters fired off questions all at once.
“How do you plan to raise the funds?”
“Does Hwaan Construction even have the capital to acquire Daejun Construction?”
“Are you truly serious about this bid?”
It was nearly impossible for Hwaan Construction to acquire Daejun Construction on its own. Without a concrete financing plan, this was nothing more than a bluff.
But then Huh Cheol-won offered an unexpected answer.
“We plan to pursue the acquisition jointly with Hwaan Energy.”
On its own, Hwaan Construction could hardly raise even the money needed to buy Daejun Construction. But if it teamed up with Hwaan Energy, the story changed.
Thanks to the sale of Thomas Motors, Hwaan Energy was sitting on 2 trillion won in cash. With that kind of money, financing the acquisition was no problem at all.
After Huh Cheol-won’s announcement, Hwaan Energy Vice President Heo Min-woong also stepped forward to state their goal.
“Hwaan Energy plans to work with Hwaan Construction to build a smart city powered by eco-friendly energy. To make that happen, we’ll acquire Daejun Construction.”
The two companies quickly submitted a joint letter of intent and hurried to assemble an acquisition team.
Unfortunately, the market did not like what it saw.
Once word of the Daejun Construction bid spread, Hwaan Construction plunged 13%, and Hwaan Energy dropped 21% alongside it.
Hwaan Construction officially submitted its letter of intent.
The news shook the stock market.
CEO Huh Cheol-won laid out the company’s plan going forward. “Daejun Construction is an extremely attractive target. After the acquisition, our first priority will be to clear out as many unsold units as possible. Just by getting rid of the unsold inventory piled up there, we can cut Daejun Construction’s debt in half.”
The Korea Development Bank looked uneasy. It argued that Hwaan Construction was simply too small to acquire Daejun Construction, and pointed to Yuban Construction, which had walked away from the deal during due diligence, as an example.
In response to those concerns, Huh Cheol-won said, “When construction firms of similar size merge, their workforces and business areas overlap, which forces restructuring or labor reallocation. But Hwaan Construction is smaller, so we won’t need to do that.”
Growing anxious, Hanjeong Mulsan announced that even after the acquisition it would not carry out restructuring and would continue investing.
But the capital increase had been stopped in its tracks.
Standing before the press, Kim Sung-gwun raised his voice. “The Korea Development Bank has been rushing this merger simply because Hanjeong Mulsan was the only company that showed interest in the acquisition. But now Hwaan Construction has emerged as a new candidate. If you still force a merger with Hanjeong Mulsan in this situation, you’re effectively admitting that this is illegal interference in a management-control dispute and a special favor.”
Until now, Daejun Construction had been a company nobody had bothered to look at twice.
That was why no one had thought of favoritism when it was first being handed to Hanjeong Mulsan. But now the situation had changed.
With two candidates on the table, at least a minimum level of review had to be carried out.
As Hwaan Construction continued to show aggressive interest and public opinion grew more heated, the Korea Development Bank finally took a step back.
“The Daejun Construction acquisition will be handled through a fair bidding process. There will be no special treatment for any particular chaebol group during this process.”
It was now all but certain that the merger would not happen before the shareholder meeting, and Hanjeong Mulsan’s stock began surging again.
I called Heo Min-woong.
“How are things on your end?”
[Don’t even ask. The company’s getting slammed with protest calls; it’s chaos. The employees are shaken too.]
After selling Thomas Motors, they had secured 2 trillion won—money that should have gone into the hydrogen industry, and still not been enough. So from a shareholder’s point of view, watching it go toward acquiring a struggling construction company was enough to make their blood boil.
The stock bulletin boards that had once been full of praise for Heo Min-woong had turned into a place of open condemnation.
[It sounds like both Hwaan Construction and the group headquarters are being pressured to withdraw the acquisition bid. I heard the Ministry of Economy and Finance and the Financial Services Commission have been calling too.]
“Just as expected.”
Chairman Heo Seong-hun had even left the country for Japan, using a business trip as his excuse.
[Our stock is dropping like a stone too. If you’ve seen the internet, you’d know I’m getting absolutely torn apart by the shareholders right now.]
“You were getting cursed at anyway.”
[Well, yeah, but still.]
“When the price falls, buy up as much treasury stock as you can. You won’t be able to buy it this cheap later.”
[Your big brother is really taking the hit for you, you know that?]
Honestly, I hadn’t expected Heo Min-woong to step in personally. Saying he was taking the heat for me wasn’t just a figure of speech.
This would have painted him all over the place.
From his perspective, though, Hanjeong Group collapsing was to his advantage. If Hwaan Group acquired HJW Energy, the hydrogen energy business would only gain more momentum.
But that was only true if the three-way alliance won at the shareholder meeting. If we lost, he’d get nothing but abuse for his trouble.
And yet he still stepped forward. Just how much did this guy trust me, anyway?
“I’ll buy you a drink when this is over.”
“Hey! For real? You promised. Don’t go changing your story later.”
“I know.”
Why was he so happy about that?
Ju Cheol-jin visited his father’s hospital room with his younger sister, Ju Hye-jin.
Chairman Ju Min-jae shook his head. “The capital increase is no longer possible.”
That had been the winning move he’d pinned all his hopes on. He had pushed it forward even at the cost of the company’s losses, but in the end, it had failed.
Who could have imagined that Hwaan Construction would step forward as a bidding candidate?
Ju Cheol-jin snapped at his sister as if demanding an answer. “What the hell happened!? Why did Hwaan Construction suddenly jump in?”
Ju Hye-jin shook her head. “I don’t know either, oppa.”
“Damn it! What’s my brother-in-law saying?”
“He says he doesn’t know either.”
“He’s not lying, is he?”
“No. He was shocked too when he saw Hwaan Construction’s announcement.”
“Then you’re saying Heo Min-woong just moved on his own and teamed up with Hwaan Construction?”
Chairman Ju Min-jae thought to himself, There’s no way.
Hwaan Group was under Chairman Heo Seong-hun’s complete control. If Hwaan Construction had made a move, that meant at the very least Heo Seong-hun had approved it, or chosen to turn a blind eye.
Putting Heo Min-woong out front was nothing more than a cover.
Chairman Ju Min-jae had tried to contact Heo Seong-hun directly, but no one answered. Considering he had left for Japan on a business trip, he probably had no intention of meeting at all.
Why would Hwaan Energy get involved?
After a moment’s thought, the outline became clear.
Continue Capital had been the one to send Thomas Motors into free fall. And just before that, Hwaan Energy had sold off its entire stake and made a massive profit.
Most likely, someone from Continue Capital had approached Heo Min-woong and given him advance notice.
So this is their way of paying him back?
What mattered most was the timing of Hwaan Construction’s move.
The whole plan had originally been pushed forward in secret with the Korea Development Bank, and the intention was to announce it only once the capital increase was under way.
That way, opposition would no longer matter.
But the press had turned it into public news before the announcement could happen. They had tried to force it through anyway, only for Hwaan Construction to declare its own intention to bid at this exact moment.
As a result, the capital increase failed, and they were left with no choice but to settle the matter at the shareholder meeting through a vote.
If I’d known it would come to this, I should’ve just stayed still.
Then they could have kept control all the way to the shareholder meeting. Instead, by stirring things up for no reason, they had even driven away the shareholders who had been on their side.
Worse, when the merger collapsed and the stock price crashed, trading volume exploded. It was obvious who had been buying up all those shares.
For Hanjeong Mulsan, it was a nightmare scenario.
Ju Cheol-jin thought of Han Miru, whom he had met before.
Could that bastard be behind this?
Given that Hwaan Energy had moved, it was probably Continue Capital rather than KSGI that had led this operation.
With a worried look, Ju Hye-jin said, “What if they really do take the control rights from us like this?”
“Father!”
At this point, they could no longer afford to think about losses.
If they didn’t want to get thrown out of the company, they had to pour in everything they had—hidden slush funds, pocket money, anything—and buy up even one more share if they could.
The problem was that the stock had already shot up to 200,000 won.
They would have to buy stock at more than five times the price they had ignored it at when it was 40,000 won, all while knowing full well it would crash after the shareholder meeting.
But there was no other choice.
“I’ll order them to buy as much as possible.”
At that, Ju Cheol-jin felt a little relieved.
If they mobilized every slush fund they had, they could buy up as much stock as possible from the friendly forces trying to defect, as well as from retail shareholders.
Chairman Ju Min-jae looked at his son and said, “As long as you get through this crisis, that will be enough. Don’t let your guard down for even a second until the very end.”
Ju Cheol-jin’s eyes gleamed. “Understood.”
This was a matter of life and death. He had no intention of relaxing his guard, not even a little.