Comments on: Tales from Planet Krypton — El-don Speaks

By: Linkd

Linkd — Mon, 07 Jan 2008 23:35:17 +0000

A single hostile M&A in Korea would be momentous, whether foreign or Korean. For one thing, you don’t lauch a takeover bid without knowing what your target is worth, which is very difficult in Korea, but I’ve already said lots about transparency earlier. (OK, one more thing- if suddenly, at a stroke, the KOSPI companies had to publish SEC-quality audit reports, their valuations would plunge unbelievably. All their values are overstated. But there are many good companies, which then only foreingers would have the money to buy, in this hypothetical thought-experiment).

Second, a successful takeover bid would mean that the aggressor managed to break the ranks of the big chaebol families, and convince them not to vote their 5% in favor of their peer. Now THAT would be something. Carl Icahn tried with KT&G. In that case, he could demonstrate clearly with publicly available records that KT&G was sitting on billions worth of real estate that it wasn’t using. Sell it and give your shareholders the money, he said. This ain’t rocket science. He failed, too.

By: Linkd

Linkd — Mon, 07 Jan 2008 23:21:56 +0000

The NBFI’s have indeed been sucking money out of the banking system and into their money market accts by offering better interest rates. The MMA money is available for lending at the discretion of the NBFI, but cannot be magnified 10X the way a bank can.

The rise of hostile takeovers would indicate that a lot of things have changed. Sovereign tried to oust Chey Tae Won (a convicted criminal ) as CEO of SK Telecom. I think they had about 15% of SKT shares under control. They failed.

So what happended? With digging, you can confirm that most chaebol subsidiaries are about 1/3 owned within the group, 1/3 institutional (includes foreign ownership), and 1/3 individual. More digging shows that cross-shareholding isn’t just within individual chaebol, it’s also AMONG chaebol. They all own about 5% of each other. So when a nasty foreigner comes along and tries to stir up shit (meaning, the foreigner tries to get the foreign institutional investors, plus individual Korean investors to vote with him in taking over the Board), the CEO of the company under attack just phones up the CEOs of the companies that each own 5%, along with the Korean institutional investors. Smackdown. End part 1.

By: Breaktrack

Breaktrack — Mon, 07 Jan 2008 22:22:05 +0000

I hope they can get their shit together here economically. Whether the Korean people will be able to see past their xenophobia and allow it to happen is another story.

It’s hard to believe that doing business in a communist country would be easier than a democratic one. Hopefully that’ll change.

By: dokdoforever

dokdoforever — Mon, 07 Jan 2008 16:55:11 +0000

Linkd-
You forgot to mention how most of the largest chaebol already own NBFI’s (non-bank financial institutions), such as life insurance companies, 신탁은행 or ‘investment/credit banks’ and other such financial companies, which they can use to prop up ailing affiliates. I suppose official bank ownership allows them to do it on a larger scale. But, they’re already heavily involved in finance. And, then Chaebol also complain - hey Korean govt you let Lone Star, and the two other foreign NBFIs prior to Lone Star (Cheil take over and maybe Seoul Bank?) take over Korean banks, but you don’t allow us to. A change in this law would make the whole Lone Star controversy a moot point, by the way. If there truly exists an open market for hostile takeovers in the finance industry, and foreigners can come in and gobble up poorly run Korean banks, then that should prevent problems of moral hazard. But, I’m not sure if that is really the case.

By: babarian.

babarian. — Mon, 07 Jan 2008 16:21:30 +0000

Thanks for the explanation, Elgin.

And pardon my misunderstanding, Linkd.

By: R. Elgin

R. Elgin — Mon, 07 Jan 2008 15:41:34 +0000

“Barbarian”, “Linkd” was teasing you in a good natured way and complaining about the smiley face picture that the blog substitutes for the standard emoticon:
: - ) — which I stretched out so that it would not end up like this:

I like many Japanese emoticons better.

By: babarian.

babarian. — Mon, 07 Jan 2008 15:34:45 +0000

Thanks for clearing it up. Good night.

By: Linkd

Linkd — Mon, 07 Jan 2008 15:06:56 +0000

I guess you wrote 15 while I was typing. Please just ignore the emoticon thing. Perhaps Elgin will explain it to you in the morning. And really, have a nice day.

By: Linkd

Linkd — Mon, 07 Jan 2008 15:02:42 +0000

Jeez, this is funny. Only 3 of us on this thread and just 14 posts, and already a misunderstanding. No wonder there’re so many scraps around here.

babarian, I said chaebol shouldn’t own banks. You said it’s OK if they do. I expanded. You replied. It’s obvious our positions are pretty close together. I said your ideas are OK, too, cuz I don’t think I have all the answers. My comment about cursing was a reference to the recent goings-on in other threads. Midnite here now, g’nite migooks!

By: babarian.

babarian. — Mon, 07 Jan 2008 14:53:29 +0000

Fucking silly fellow! What’s there to be so fucking upset about? Get a fucking life!