Yokohama Electron (9)
Yokohama Electron’s acquisition differed from every company I’d bought before in two major ways.
First, it was the largest target I had gone after yet. Just its market capitalization came to a staggering 10 trillion yen, which worked out to roughly 100 billion dollars.
Second, there was competition.
Until now, I’d been able to buy companies without much trouble. This time, though, a host of rivals had entered the fray.
Could I really beat them all and take Yokohama Electron for myself?
Continue Capital’s Korean branch was kept busy analyzing the company.
The same was true of Yuseong Electronics. The in-house M&A specialists were busy valuing the business and discussing what to do after the acquisition.
Company analysis drew on every metric imaginable.
The volume of data was enormous, too. Depending on which indicators you emphasized, the company’s value could change dramatically.
While that was going on, I met the head of overseas investments for the Saudi sovereign wealth fund, another pillar of the consortium.
“I heard you’ve started buying on the open market. Is it really necessary to secure a majority stake?”
“If we’re buying anyway, a majority is better. It’s safer against any threat, too.”
“If you can’t get your hands on the Insight Fund’s stake, though, then it won’t matter how much you buy on the market.”
“Exactly why we need to buy the Insight Fund’s shares.”
“The problem is the competition.”
Sara sipped her coffee as she spoke.
“I’m hearing CMIC will join the bidding, too.”
I nodded.
“That figures.”
It had been expected to some extent.
CMIC was China’s largest semiconductor company.
It was practically a state-owned enterprise. If you looked at it another way, it might have been the party that wanted Yokohama Electron the most.
So they weren’t going to let this pass quietly, either.
“How high are you willing to go?”
I thought of what David had said.
The important thing was price.
Even a good company became a bad one if you paid too much for it, and even a bad company became good if you bought it at the right price.
So how much could I afford to spend on Yokohama Electron?
This situation hadn’t existed in my first life. There was no guarantee everything would unfold according to my plan. That meant I couldn’t afford to get complacent.
I had to analyze every variable carefully and move in a way that wouldn’t let anything unexpected creep in.
After a moment’s thought, I said, “I’m considering going as high as twice the current value.”
Sara’s eyes widened.
“You’re serious?”
“Yes.”
She looked at me and asked, “Can you really make a profit buying at that price?”
I answered with confidence.
“At the very least, it’ll deal our rivals a fatal blow.”
* * *
The sale process for Yokohama Electron moved forward.
Rumors of a sale had been circulating for some time, but expectations were low. Then Continue Capital teamed up with Yuseong Electronics and jumped in, and everything changed.
Everything Continue Capital had touched so far had turned into an enormous success. Yuseong Electronics, too, had recently scored huge gains through mergers and acquisitions.
When word spread that those two companies had joined forces for the takeover, everyone began watching Yokohama Electron.
Semiconductor-related companies and private equity funds were equally interested.
Everyone was carefully analyzing Yokohama Electron’s value and weighing whether to invest.
“Why would they try to acquire an equipment maker?”
“Are they developing some kind of new technology?”
“Do they think the growth trend is going to keep going?”
Then, all of a sudden, the stock price started climbing. In just three trading days, it shot from 5,200 yen to more than 7,000.
* * *
Tim Keaton, the CEO of Enple, was receiving live updates on Continue Capital and Yuseong Electronics’ moves when he contacted Chairman Chen of PSMC.
[It appears the CYP consortium is conducting an open-market buyout of Yokohama Electron.]
“So they intend to secure a majority stake.”
The Insight Fund held 36 percent.
If they secured an additional 15 percent off the market and then acquired that stake, they would hold 51 percent—enough for a majority.
[There are also rumors they will launch a tender offer soon.]
A tender offer.
That meant publicly announcing that they would buy a certain amount of stock at a certain price over a certain period.
Usually, of course, the price offered was higher than the current trading price.
If someone announced they were willing to buy a stock trading at 100 for 130, then no matter what the current market price was, shareholders could sell to the bidder at 130.
So they mean to get it no matter what it costs?
Yokohama Electron was unquestionably a company worth 100 billion dollars.
But no more than that.
Tim Keaton thought the most a buyer should add as a control premium was 30 percent. Beyond that, there was no reason to go through the trouble of acquiring it.
But Continue Capital and Yuseong Electronics both seemed to be taking the position that price didn’t matter.
[There are rumors the CYP consortium has offered SoftBox 7.2 trillion yen.]
That was twice the market value.
SoftBox Group did not exactly deny it.
Even after accounting for synergies after the acquisition, paying double was absurd. And yet it seemed the CYP consortium intended to buy it at that absurd price if necessary.
To make that happen, Han Miru had personally gone to Japan to meet Chairman Song and Chairman Nakazato, while Chairman Yoo Jae-ho visited China.
Why are they going this far just to get Yokohama Electron?
No matter how much he analyzed it, he couldn’t find a clear answer.
At first he thought it had to do with new technology, but until a new technology is actually developed and applied, its true value is impossible to know.
Still, Han Miru always moved several steps ahead. And every time, he produced results no one else could have imagined.
Tim Keaton thought of the NP Semi case.
That company had been Enple Silicon’s masterpiece.
If Enple had secured NP Semi, its semiconductor design capabilitiesCHAPTER_TITLE: Yokohama Electron 9
Yokohama Electron’s acquisition differed from every company I’d gone after so far in two major ways.
First, it was the largest target I’d ever taken on. Just its market capitalization came to a staggering 10 trillion yen, or roughly 100 billion dollars.
Second, it had competitors.
Up to now, I’d been able to move comfortably, with little serious opposition. This time, though, a variety of rivals had entered the field.
Could I really outmaneuver all of them and get my hands on Yokohama Electron?
Continue Capital’s Korean branch was in overdrive analyzing the company.
Yuseong Electronics was no different. The in-house M&A specialists were evaluating its value and discussing the post-acquisition strategy.
Countless indicators were being deployed in the analysis.
The amount of data was enormous as well. Depending on which metrics you emphasized, the company’s value could change dramatically.
In the middle of all that, I met with the head of overseas investment for the Saudi sovereign wealth fund, the other pillar of the consortium.
“I heard you’ve started buying in the open market. Is it really necessary to secure a majority stake?”
“If we’re going to buy it anyway, wouldn’t a majority be better? It’s safer against any unforeseen threats, too.”
“If you can’t get your hands on Insight Fund’s stake, then it won’t matter how much you buy on the open market.”
“Which is exactly why we need to buy Insight Fund’s stake.”
“The problem is the competitors.”
Sara sipped her coffee as she spoke.
“I’m hearing that CMIC is going to join the bidding.”
I nodded.
“That figures.”
It was more or less expected.
CMIC was China’s largest semiconductor company.
In all but name, it was a state-owned enterprise. In a sense, it was probably the party that wanted Yokohama Electron most of all.
So they weren’t going to just stand aside and let this pass.
“How much are you thinking of going up to?”
I thought of David’s words.
Price was everything.
A good company bought at too high a price became a bad company, and a bad company bought at the right price became a good one.
So how much was Yokohama Electron worth to me?
This situation hadn’t existed in my first life. There was no guarantee that everything would unfold according to my plan. That meant I couldn’t afford to relax.
I had to analyze every variable carefully and move in a way that prevented surprises.
After a moment’s thought, I answered.
“Up to twice the market price.”
Sara looked at me, stunned.
“You’re serious?”
“Yes.”
She studied me and asked, “Can you really make a profit buying it at that price?”
I said with confidence, “At the very least, we can deliver a fatal blow to the competition.”
◇◇◇◆◇◇◇
The sale process for Yokohama Electron moved forward.
The rumors had been swirling for a while, but people had expected the auction to be underwhelming. Then Continue Capital jumped in alongside Yuseong Electronics, and everything changed.
Continue Capital had turned every investment it touched into a massive success. Yuseong Electronics, too, had recently reaped huge gains from an acquisition.
Once word spread that these two companies were joining forces to make a bid, everyone turned their attention to Yokohama Electron.
[100 Billion Dollar Yokohama Electron Acquisition, Global Corporations Enter a Web of Alliances]
[Yoko Elec Buyout War Emerges as the Hottest Deal in Semiconductors!]
[Yokohama Electron Bidding War Heats Up: Why Did Chairman Yoo Jae-ho Step In Personally?]
Semiconductor-related companies and private equity firms were equally interested.
Everyone was carefully analyzing Yokohama Electron’s value and debating whether to invest.
“Why are they trying to acquire an equipment company?”
“Are they developing some kind of new technology?”
“Do they think the growth trend is going to continue?”
Then, all of a sudden, the stock began climbing. In just three trading days, the price surged from 5,200 yen to over 7,000.
-Who the hell is buying?
-I heard the CYP consortium, with Continue Capital and Yuseong Electronics, has started accumulating shares.
-How high is this thing going?
-Shouldn’t we buy now, before it’s too late?
-If Continue Capital acquires it, they might buy up the whole thing and delist it outright.
-Are they planning to make Yoko Elec a full subsidiary?
-Yuseong Electronics can’t be allowed to do this! We have to stop a great Japanese company from falling into Korean hands!
-And it’s okay if it falls into American or Taiwanese hands?
-What nationality does capital have? The one with the most money buys it.
◇◇◇◆◇◇◇
Tim Keaton, CEO of Enple, was receiving real-time reports on the movements of Continue Capital and Yuseong Electronics when he contacted Chairman Chen of PSMC.
[It appears the CYP consortium has begun buying Yokohama Electron shares in the market.]
“So they intend to secure a majority stake.”
Insight Fund held 36 percent.
If they secured another 15 percent in the open market and then acquired that block, they’d have 51 percent—enough for a majority.
[There’s also talk that they’ll launch a tender offer soon.]
A tender offer.
It meant publicly declaring that, for a set period of time, they would buy a set amount of stock at a set price.
Naturally, they usually offered above the current market price.
If someone announced they’d buy stock trading at 100 for 130, then no matter what the current price was, shareholders could sell to the bidder for 130.
So they’re determined to get it no matter what it costs?
Yokohama Electron was unquestionably a company worth 100 billion dollars.
But no more than that.
Tim Keaton believed the most he could justify as a control premium was 30 percent. Beyond that, there was no reason to go through the trouble of acquiring it.
But now… both Continue Capital and Yuseong Electronics seemed to think price didn’t matter.
[There’s a rumor that the CYP consortium offered Softbox 720 billion yen.]
That was double the market price.
Softbox Group didn’t exactly deny it.
Even if you factored in the synergy after the acquisition, twice the market price was absurd. Yet it looked as if the CYP consortium was willing to go through with the deal at that impossible valuation.
To do that, Han Miru had personally gone to Japan to meet Chairman Song and Chairman Nakazato, while Chairman Yoo Jae-ho traveled to China.
Why go this far just to get their hands on Yokohama Electron?
No matter how Tim looked at it, he couldn’t see a clear reason.
At first, he thought it might be for new technology. But technology’s true value was impossible to know until it was actually developed and put to use.
Han Miru, however, always saw several moves ahead. And every time, he produced results no one else could even imagine.
Tim Keaton thought of the NP Semi case.
That company had been the masterpiece of Enple Silicon.
If Enple had managed to secure NP Semi, its semiconductor design capabilities would have risen to a level that crushed the competition.
But Yuseong Electronics had snatched it up in the brief hesitation before Enple could move, and now it was the company designing Yuseong Electronics’ AP chips.
So what about Yokohama Electron?
He didn’t know whether this company was Enple’s masterpiece or not. But it was clear that, for Continue Capital and Yuseong Electronics, it was a masterpiece.
They could not be allowed to simply take it away.
In terms of financial firepower, neither Enple nor PSMC was lacking. The problem was that if this turned into a chicken race, whoever won would walk away wounded.
As Tim Keaton wrestled with the issue, Chairman Chen spoke.
[There is one good method.]
“What is it?”
[This is what we do…]
Chairman Chen explained the plan he had in mind, and Tim Keaton nodded.
“Yes. That would definitely put a check on the CYP consortium.”
◇◇◇◆◇◇◇
Sankei Shimbun.
It was the most conservative daily newspaper in Japan, and a publication also fairly well known in Korea.
The reason was simple: it had sparked controversy numerous times with anti-Korean reporting.
Oshima Shogo had joined the paper as a reporter two years earlier. He liked Sankei Shimbun’s editorial line.
Unlike other media outlets that always worried about optics, Sankei Shimbun boldly said how great Japan was, how much harm Korea and China had done to Japan, and how many filthy things they were still doing.
Sankei is the only real Japanese media! I don’t need to listen to what the others say!
Unfortunately, the paper’s situation was far from good.
It had once been a nationwide daily distributed all across Japan, but now it had been reduced to the Tokyo metropolitan area and the Kansai region. Financial strain had forced it to restructure and lay off employees.
It posted articles online for free, earning the strong support of net-right extremists, but that didn’t make much money in the end.
Advertisers had stayed away for fear of damaging their own image.
As a result, Sankei had become little more than a mouthpiece for online extremists, and within Japan it was barely treated as a proper news outlet anymore.
So the reporters there weren’t really thinking about honest investigation and careful writing. They were thinking about how to squeeze as many clicks as possible out of nationalist drivel and anti-Korean articles.
From the moment Oshima Shogo joined until now, he had mostly written articles about Korea.
In other words, he had written anti-Korean pieces.
[10 Reasons Korea Is Still a Backward Country]
[Shock! The Ugly Reality of Korean Idols!]
[How Much Longer Can We Ignore Korean Production Companies Shamelessly Copying Japanese Culture?]
[Outrage! Experts Predict Korea Will Collapse Within 30 Years!]
[The Grave Crimes of Zainichi Koreans! They Must Be Expelled from Japan!]
The articles he wrote were popular with net-right readers and racked up enormous traffic.
Thanks to that, he’d become a star reporter well known among extremist circles, and he was often invited to conservative rallies.
As he wondered what kind of article to write next, an email tip arrived.
Reading it absentmindedly, Oshima Shogo was so shocked that he immediately reported it to Editor-in-Chief Kato.
“Please take a look at this.”
“What is it?”
After reading the material Oshima handed him, the editor-in-chief was just as stunned.
“Huh? What is this?”
[We Reveal the Truth About Continue Capital and Yuseong Electronics]
The tip was shocking in the extreme.
It claimed that Continue Capital and Yuseong Electronics were behind Chairman Samara’s escape from Japan!
There had been rumors about it for some time.
But this anonymous tip, written in the form of a denunciation, laid out those rumors in a plausible, logical way. It felt as if an insider had come forward to expose the whole thing.
“Who sent this?”
“I don’t know. It was an anonymous email, and when we replied asking for confirmation, they didn’t even check it.”
“Hmm.”
They didn’t know who the tipster was, and there was no real evidence. It was just a pile of circumstantial suspicion stitched together.
A normal news organization would never print something like this as an article.
But Sankei Shimbun was not the kind of paper that cared about such petty problems. The most important thing in journalism was not whether something was true.
It was click volume.
And for clicks, nationalist hype and anti-Korean outrage were unbeatable.
They’d already been worried lately because there hadn’t been many sensational stories…
This article will be a huge hit!
And with the Yokohama Electron acquisition battle already flooding the news, what would happen if they ran this story now?
It would grab the world’s attention.
Editor-in-Chief Kato gave the order at once.
“Run this immediately as a feature.”
“Understood!”
Then Yoshiki, the deputy editor who had been listening from the side, asked cautiously, “Shouldn’t we investigate a little more first?”
“Investigate? We’ve got a tip this solid and you still want more?”
“What if Continue Capital and Yuseong Electronics deny it?”
Editor-in-Chief Kato said flatly, “The media has a duty to report the truth! No one can stop that!”
“But what if it turns out to be a false tip…”
“Then it turns out to be false! Are they going to sue us or what?”
“……”