CH419 | Heir

The current administration opposed government-led big deals.

However, it did not block privately initiated ones, and so a major deal was struck to resolve the succession issue of the Samsung Group.

The merger of Samsung Bio and Samsung Trading.

Samsung Trading, the core of the Samsung Group, merged with Samsung Bio, an affiliate under Vice Chairman Oh Yong-jae.

Since the value of Samsung Bio had risen significantly, Vice Chairman Oh was able to secure a large number of shares, ensuring a stable succession of leadership.

“Vice Chairman Oh Yong-jae must feel greatly relieved.”

“The succession process was flawless both legally and in terms of accounting. Even if the administration changes, there doesn’t seem to be any risk of problems arising.”

Vice Chairman Han’s analytical skills were undeniably the best in Korea.

Having overseen and participated in numerous mergers both in Korea and on Wall Street, his words carried weight beyond doubt.

“Vice Chairman Oh had better throw a lavish feast.”

“In fact, he already reached out. He said he’d like to meet you soon and share a meal. It seems he intends to host generously, partly to repay the favor.”

“You still don’t fully understand the chaebol ecosystem, Vice Chairman Han. Chaebols never ask for meetings just to repay favors.”

They were rivals as much as they were partners.

Since they could turn into enemies at any time, chaebols were always cautious when it came to repaying debts.

The fact that contact came so quickly meant that Oh must want something else.

“But with the succession issue already settled, what more could he want from the chairman?”

“We’ll know once we meet him. Still, it’s not necessarily a bad thing. If he does want something new, at the very least, he’ll compensate us for what’s already been done.”

Credit was only ever extended once.

If he failed to settle the debt for help with the succession, there would be no next deal.

Vice Chairman Oh Yong-jae wasn’t the sort to disregard such matters—he would know well the basic principles of this kind of transaction.

“And we’ve also prepared policies and pledges regarding the Saemangeum Chemical Complex and the Busan New Port, which we delivered to the National Economic Party.”

“How did they respond?”

“They said it was a highly complicated matter, so they would need a few days to think it over before giving an answer. I expect Congressman Choi Jae-seok will likely come to meet you soon.”

It was by no means an easy matter.

In the case of the Saemangeum Chemical Complex, it could turn civic groups into enemies.

As for the Busan New Port, since it was tied to a big deal between two shipping companies, the government itself could be antagonized by the policy.

In the end, we—the parties directly involved—would have to meet and settle it face-to-face.

If I could persuade him, then I could shape things exactly the way I wanted.

“So, Congressman Choi Jae-seok will likely reach out in the next few days.”

“I’ll make sure to schedule it carefully so there won’t be any conflicts.”

“First, let’s meet Vice Chairman Oh Yong-jae.
I’d like to meet him this evening—would that be possible?”

“I’ll try to coordinate the time with the Samsung Group.”

“That’s not something a vice chairman like you should be handling. Just pass the task along to the Planning Office.”

Thirty minutes later, the Planning Office contacted us.

We arranged to meet Vice Chairman Oh Yong-jae at the Samsung Hotel.

Samsung Hotel.

It was the hotel that had come into the ownership of Vice Chairman Oh Yong-jae’s younger sister, in exchange for him inheriting the Samsung Group.

“Chairman Kim, welcome! First, let me express my gratitude. Thanks to you, the succession process was resolved very cleanly. I truly appreciate it.”

“Even as a polite formality, I should probably say I didn’t do much. But in truth, helping Samsung Bio gave Centurion’s stock price a very hard time.”

“Still, I understand the stock price has rebounded thanks to the development of the new diabetes treatment. I really envy you.
To succeed even in new drug development—surely, that’s all thanks to Chairman Kim’s outstanding ability, isn’t it?”

He must indeed be after something.

Vice Chairman Oh was flattering me excessively, as if gilding me with praise.

Even throughout the meal, he kept showering me not just with compliments, but with the highest praise, putting me on a pedestal.

It wasn’t until we had finished eating and were sipping wine that he subtly shifted the conversation to his real concern.

“Although the issue of shares has been settled, the succession isn’t completely finished.”

“Everyone already recognizes you as the new owner of the Samsung Group, Vice Chairman Oh. So what problem remains?”

“Not yet, but soon the inheritance tax will become an issue.”

Inheritance tax was one of the greatest burdens faced by chaebols.

It was not uncommon for management control of companies to end up in the hands of the state because of it.

Owners often had to sell their shares to pay the tax, and as a result, major shareholders frequently became the National Pension Service or the Industrial Bank of Korea.

“The inheritance tax will be substantial, no doubt.”

“It amounts to as much as 10 trillion won. My personal share of that is 3 trillion, which I must pay over six years at 500 billion won per year.
But since I cannot simply dip into Samsung Group’s retained earnings for personal use, it weighs heavily on me.”

Samsung Group’s retained earnings were close to 100 trillion won.

But because inheritance tax was levied on individuals, corporate funds could not be used.

Vice Chairman Oh had no choice but to cover it through his own personal assets or by selling off shares in the group.

And he wasn’t the only one responsible for the payment.

When combined with the amounts owed by the entire owner family, the total inheritance tax came to 10 trillion won.

“If you need a loan, Taewoo Securities can lend you the full 3 trillion won without collateral, at a very low rate. If you spread the repayment over as long as twenty years, wouldn’t that ease the burden?”

“That option is good, but wouldn’t it be better to reduce the inheritance tax itself?”

“It sounds like you’re considering something risky. If it’s tax avoidance, I won’t stop you. But if it’s outright tax evasion, I cannot assist.”

Owner families often walked a fine line between tax avoidance and tax evasion when dealing with inheritance taxes.

The easiest method was to secretly transfer shares under borrowed names, but while such methods might not be caught immediately, they inevitably caused problems later.

“How could I possibly ask you to help with tax strategies? We’ll look into tax-saving methods within the Samsung Group itself. Could you simply help us with the remaining inheritance tax once those measures are in place?”

“Taewoo Securities will provide unsecured credit loans to cover the inheritance tax owed by the owner family. If you find Taewoo Securities burdensome, I can also connect you with overseas banks. Would repayment over twenty years at an interest rate in the one-percent range be acceptable?”

“If you can help us in that way, I’d be deeply grateful.”

A 10-trillion-won loan, purely on credit.

Even for the owner family of the Samsung Group, securing 10 trillion won in unsecured loans was no easy feat.

They could sell shares or pledge them as collateral to borrow from banks, but that would mean higher interest rates.

For the sake of preserving management control, borrowing from me was far more advantageous than turning to the banks.

“And I can also help you with the sale of other shares. I hear there’s talk of selling your joint investment stake in ASML. Wouldn’t it be preferable for a Korean company to acquire it rather than a foreign one?”

“Taewoo Group’s intelligence network is truly impressive. Yes, we were planning to sell our 1.6% stake in ASML.”

ASML, located in the Netherlands.

It was a company many people didn’t know, but if you worked in semiconductors, it was a name you absolutely had to know.

Without ASML’s machines, it was impossible to manufacture semiconductors.

ASML was the only company in the world that produced optical lithography equipment.

Many companies had tried to challenge ASML’s dominance, but none could overcome the immense technological gap.

As such, ASML occupied a position of absolute power in the semiconductor market.

It was so dominant that, under the pretext of developing new technologies, it could demand investment money from semiconductor companies in exchange for developing those very technologies.

Through this process, semiconductor firms ended up with small stakes in ASML.

These were co-investment shares that conferred no influence over management rights, and both Samsung Group and Taewoo Group held such stakes.

“Doesn’t Samsung Group own more than three percent of the shares? Taewoo Group could purchase the entire stake from you.”

“The amount involved is no small matter.”

“I believe it’s around 1.5 trillion won. You first joined the co-investment about four years ago, correct? In just four years, the value has risen more than fivefold.”

Every investor dreams of realizing profits.

Samsung Electronics had acquired a 3% stake in ASML for about 350 billion won.

With the value rising fivefold in just four years, it was only natural to dream of cashing out.

“You’re very well-informed. In truth, ASML’s stock is expected to keep rising, so I had no intention of selling at its current valuation. But for you, Chairman Kim, I’ll sell at today’s price. After all, I must repay the debt of gratitude somehow, mustn’t I?”

“Then Taewoo Semiconductor will purchase ASML’s shares at the current price. I’ll send a working-level team to Samsung Group later this week.”

“Don’t think that by selling ASML’s shares I’ve repaid all my debts. Should Samsung Group ever be of use to you, please don’t hesitate to ask. If it’s a request from Chairman Kim, I will do everything in my power to fulfill it.”

Vice Chairman Oh Yong-jae was undervaluing ASML’s shares.

But in reality, their worth was far greater than he believed.

Within just a few years, the value of those shares was set to more than double.

That alone would bring me over 1 trillion won in profit.

And there was another kind of value that couldn’t be measured in money alone.

Priority rights.

The priority for acquiring ASML’s machines depended on shareholding.

For now, the production capacity of ASML’s machines was enough to be distributed to everyone.

But as time went on, more and more companies would want ASML’s equipment.

That meant demand would rise while supply stayed the same, and priority rights would be determined by share ownership.

This gave Taewoo Semiconductor the chance to secure a technological edge.

Even half a step ahead could be enough to monopolize the market.

To be offered such shares at the “bargain” price of 1.5 trillion won was something I could only be grateful for.

“I hope we can continue maintaining such a good relationship. In Korea, we may seem like competitors, but in the global market, don’t you think it’s only by joining forces as domestic conglomerates that we can face the world?”

“Those are excellent words!”

We finished the dinner in a warm and pleasant atmosphere.

I returned straight to the office and summoned Vice Chairman Han, who was still working late on Brexit-related matters.

“Buy up the ASML shares being sold in the U.S. and Taiwan. Don’t show aggressive interest, but whenever there’s intent to sell, acquire them.”

“In fact, word is spreading that Intel plans to sell about 10% of its ASML shares.”

“Buy all of them, regardless of price. At the very least, we can make double our investment, and with the added strategic value, it could easily become a tenfold profit. It should be possible to secure them for around 5 trillion won.”

“So you’re saying this is an investment that could turn 5 trillion into 50 trillion. I’ll secure them even if I have to force it!”

Samsung Group wasn’t the only one dreaming of profits.

Intel in the U.S. and semiconductor companies in Taiwan also hoped to cash out their ASML stakes.

However, only the Taewoo Group was actively acquiring more shares, which tilted the situation in our favour.

“And Congressman Choi Jae-seok contacted us.
He wishes to meet you tomorrow.”

“So he made up his mind faster than expected.
I thought such a difficult matter would take him at least a week.”

The semiconductor issue was settled.

Now it was time to resolve the shipping industry problem with Congressman Choi Jae-seok.