Offerings

by Michael ByungJu Kim

  “Hello, Johannes,” I say. I wait, let him start the discussion.

  Hesse says, in clipped English, “We called to say we are potentially interested on a preliminary, indicative, nonbinding basis, but only at the right price and conditions.”

  “We welcome your interest,” I say. “But, as you know, we’re running a process. With multiple interested parties.” Join the party of one.

  “We prefer to have bilateral discussions,” he says. His words come out like marching soldiers. “Not participate in a competitive auction.”

  “Your preference is noted,” I say, cool as bingsoo. Bilateral meaning exclusivity in negotiations. It’s the tipping point in any deal process: when a buyer gets it, the power in negotiations shifts to them. The less I say at this point, the better. Information is the valuable commodity, and, as seller adviser, I have it, they don’t. A good M&A tactician levers the information asymmetry to maximum advantage. I need to hoard the information on which options we have and what we might do; given my motives, moreover, I need to make a show of hoarding it.

  Silence on the other end. I can picture them discussing among themselves, with their phone on mute. They’ve tested us, to see how desperate a seller we are; I’ve responded, not so much. As is my habit on conference calls, I doodle, covering a sheet of yellow legal paper with butterflies and some notes.

  “What we mean is,” Hesse says, sounding less sure, “our management has a long history with the Ilsung owner and their management. We know the Motors asset inside out. We have minimal diligence requirements. After all, we gave the license on the engine for the Chairman model. Yes?”

  “Yes.”

  “We understand your client’s priorities are certainty of closing and price, in that order, and we can provide certainty like no other—”

  “They’re all priorities.”

  Another silence. They’re compelled to ask, “So, is there a path for Daimler to enter into negotiations with Ilsung or not?”

  I could blow up the deal here. But that wouldn’t be very sporting of me. “My client is open to all options.”

  “Give us a minute,” he says, placing me on hold again.

  I think about the promise I made to Wayne. Thunderball holds the keys to the kingdom, he said, gripping my shoulder. He gave me the project because he trusts me, and I promised to do my best to sell T-ball and salvage the group. I gave him my word. The image of the labor leader Yoon’s earnest, unshaven face floats back to me. So too the bloodied, goggled head of the protester fallen next to me. The chant of the protesting laborers at the factory rings in my ears.

  When he comes back on, Hesse says, “Can we assume there is a price at which Daimler will be granted exclusivity?”

  Jack’s strategizing returns to me; I know what he’d say. I remind myself, no bombs, have to make it seem plausible. “We’re open to all options,” I repeat.

  “We need final sign-off from Stuttgart, but we are prepared to make a nonbinding offer of $1.95 billion in enterprise value, on a debt- and cash-free basis and assuming normal level of net working capital.” He pauses for a reaction from me. Getting none, he continues, “That represents valuation of over seven times latest-twelve-months EBITDA. For exclusivity in negotiations. For the avoidance of doubt: if you insist on a competitive process, we are out.” I can almost hear the umlaut.

  It’s a good price, higher than I expected and a decent premium to what the business is worth. Jack would’ve jumped at it. Uncharacteristic of the Germans. I begin to think maybe they’re “pregnant,” as we say, with the deal. They’ve decided they have to make this acquisition in Korea as a platform for expansion into China, a market with nearly unlimited potential. Or maybe, unbeknownst to us, management has committed to a deal with the Parks of Ilsung.

  “Let me take it back to the client.” Time for the slingshots. “One more thing,” I say, with Detective Columbo–like casualness. “Daimler will need to assume the $4.5 billion in Ilsung Motors bank debt.”

  “Debt?” Hesse says. “We were guided that this was an asset sale? The tax implications for—”

  “Stock deal. Debt goes with.”

  “We’ll need to discuss it internally—”

  “Also, there’s unfunded pension liabilities, about $300 million.” Now for the catapults. “Oh, and there’s a few other contingent liabilities. Off-balance-sheet guarantees of sister Ilsung companies’ loans, et cetera. Not a big amount, $500 million or so.”

  A stunned silence on the other end. I decide to go out guns blazing, like the North Korean commandos. “And we’ll need ironclad job security for the employees, too.”

  “Job guarantees . . . that was never on the table—”

  “It’s a priority. For my client.” For the avoidance of their doubt, I add, “It’s a deal-breaker.”

  “This is . . . a lot to take in.” They sound confused, defeated. “We’ll need to discuss with senior management.”

  “You do that,” I tell them. My insides feel fluttery, even as I tell myself, Make butterflies. In all the colors of the rainbow.

  After hanging up, I consider calling Wayne to let him know I had a difficult discussion with Daimler and they may be on the way out. To tell him a deal, especially a complex sale, goes through ups and downs, woo-yuh gok-jul, kind of like the vicissitudes of life. I decide it’s too late in Seoul, better to catch up with him in person later in the week.

  Days of planning, hours of vacillating, and I’ve done it, shit-kicked Project Thunderball. I look at the doodles on my yellow pad. Sabotage T-ball →Throw bombs? No, slingshots^^ →High price bogey. Debt, contingents →Daimler out →No T-ball sale →Keep JOBS!! No cash for W/Ilsung to pay creditors →What happens to IS?! Christ, what have I done?

  Wayne will survive, I tell myself—that’s what chaebol do. I’m doing the right thing. As Abuji counseled, and Jee Yeon suggested. But I will be alone with the consequences to carry with me.

  Sitting in my father’s chair, I survey the emptiness of the room, hollowed out of sound. The books around me, once so full of life and mystery and magic, look abandoned, forlorn; they could be blank as the books on Jay Gatsby’s shelves. They’re vessels without their master. The room a shrine with no purpose.

  30

  March 30, 1998

  As I pass through the arrivals area at Gimpo, dizzy from another sleepless fifteen-hour flight, a headline at the newsstand catches my eye: ILSUNG TO DECLARE BANKRUPTCY. The article in Daehan Ilbo details the imminent collapse of the Ilsung corporate empire. Billed as the largest corporate bankruptcy in Korean history, at $38 billion. I grab all the newspapers I can find and scramble into a taxi.

  News coverage of the Ilsung Group’s mounting financial troubles has been a building drumbeat for weeks. There were reports of Ilsung Shipbuilding and Ilsung Construction missing loan payments. Speculation thrumming about how much longer Corp. and Electron could continue propping up the cash-hemorrhaging group affiliates. Pronouncements out of the Blue House about an unwavering commitment to chaebol reform. A couple of days ago, I saw footage of President DJ Kim proclaiming there would be no government bailout of Ilsung companies. Meaning only a market-based solution. Still, they said, this is the Republic of Chaebol. And Ilsung, dae-ma bool-sa. Big horse cannot die. Too large, too many jobs at stake.

  Just before I left for Seoul, the Phipps coverage banker for Daimler-Benz had informed me of its intention to pull out of Thunderball. This intelligence should have made me feel gratified, but all I’ve been feeling is guilt and anxiety. I can’t sleep, I have trouble breathing. I’m in Seoul to make sure GM Korea, the only viable remaining acquirer for Motors, also stays sidelined. The final nail. It has to be done, I reassure myself. Speed is of the essence now. Sok-jun sok-gyul, as Abuji taught me.

  But an imminent group-wide bankruptcy is too quick for me, and beyond all my planning. Declaration of default at Electron or Motors would trigger cross defaults at many of the Ilsung companies and throw them into creditor-led workouts or c
ourt receivership. The fate of Motors and its workforce is up in the air. My T-ball gambit was a smart bomb, aimed at focused damage, not a nuclear bomb to blow up the group. I need to get things under control. I call Wayne from the taxi to get an update, also to check how much he knows, but I can’t get him, not in his office, on his mobile, even his trusty beeper. Next I try the Group Strategy head, but no luck. I wonder briefly if they’ve found a back-channel arrangement with the government.

  I riffle through the newspapers. There are pieces on the group flagships but not on Motors. The creditor group, in conjunction with the MoEP, is conducting a review of all the companies in the group to determine which entities it will take over, which to sell off, and which to put into court receivership or liquidation. The only done deals are KIDB takeovers of Ilsung Electron and Life Insurance. There are some articles on what might happen to Chairman Park and the owner family. An editorial in a liberal daily proclaims, “Sah-pil kwee-jung.” Justice prevails.

  A right-leaning business daily runs a series of articles bemoaning the likely adverse impact of chaebol group failures and witch hunts of chaebol families on the economy and markets. The usual hand-wringing over a potential domino effect on other big groups. Just when the economy, struggling to recover, needs them the most. Not to mention the severe damage on the image of Korea abroad.

  As soon as I reach my hotel room, I call Jack in the office. “A shit storm,” he says, uncharacteristically solemn. “Might as well kiss T-ball goodbye. Monkey’s sending the Restructuring team out from New York.” A leading indicator of the beginning of the end.

  “You okay?” Jack says. “You sound out of it.”

  “I gotta go,” I say, closing the phone.

  It’s all getting ahead of me. No sooner do I hang up with Jack than my phone rings—Jun this time. He says to turn on the TV.

  I click to KBS, and the lead story is Wayne’s father. Chairman Park has been charged with fraudulent accounting, tax evasion, and breach of fiduciary duty. An icon of Korean business, the face of chaebol power, in disgrace, goes the storyline. They run loop footage of a posse of prosecutors carting away boxes of documents and disembodied PCs from Ilsung’s headquarters. Then they show Chairman Park in a wheelchair, wearing sunglasses and a face mask, being wheeled into Ilsung General Hospital. He’s mobbed by reporters thrusting microphones in his face, shouting questions at him. He looks old, frail. He raises a weak hand to wave them off.

  There’s file footage of the Ilsung Group’s sprawling global business empire. Black-and-white shots of Ilsung steel mills, more recent videos of Ilsung Electron DRAM chips and Ilsung LCD TVs spinning off assembly lines. The obligatory mention of the over forty business units and 280,000 employees.

  Then I see it. The news scrawl at the bottom of the screen: KIDB-led creditor group to assume control of Ilsung Motors. Thunderball gone.

  Jun’s voice comes crackling over the phone, left on the bed. “You seeing this? . . . You still there?”

  A reporter comes on to say strategic discussions with “a leading German automaker” fell through at the last hour. Having no other prospects, the Motors creditors pulled the plug. The Parks are out; KIDB and the creditors in. My foiling Daimler was the coup de grâce. Ilsung ran out of time. Just not the way I’d planned it.

  I sit down on the bed. I picture the laborers of Motors, chanting their rights and fighting for their livelihood in the face of indignity and tear gas. Even if they keep their jobs for now, what will happen to them when the banks need to get their money back and put the company up for sale again? Did I really do right by them? I think of the Park family. Empire fallen, emperor to jail. What of the Prince? Wayne is probably in hiding somewhere, plotting his next move with Kim Sil-jang. Frantic is not his style; more like simmering resentment, at me for not being able to sell Motors to get him the desperately needed liquidity. Ruing ever trusting me. Guilt returns to me, crackling in the space between a flash of lightning and the clap of thunder to come.

  I take a deep breath. It dawns on me that the scenario Wayne had been fearing was not his losing controlling power of Ilsung Group but the entire group’s going under. This whole time he was trying to save the group. To salvage four decades of corporation building and some residual value for shareholders and bondholders, not to mention hundreds of thousands of jobs. And doing it the only way he knows how, exercising princely, unilateral control, however illicitly obtained. Like President Park Chung Hee, or Chun Doo Hwan after him, who each believed only he, wielding dictatorial powers, unconstitutionally secured, could lead the Republic to economic success. The grand delusion of monarchs and dictators alike, and their inevitable downfall. Wayne just didn’t figure on his M&A adviser, and confidant, undermining him.

  My BlackBerry twitches in vibration on the desk. I pick it up, and there are over twenty e-mails captioned “T-ball.” A dozen urgent messages from M&A head Conway, saying, “Call me when you land,” “Call right away,” “CALL ASAP!!” I press down on the off button, bury the BlackBerry in my briefcase.

  Just as I’m about to turn off the TV, there’s breaking news. It’s live footage of Wayne, his hands in handcuffs covered by a trench coat, being led into the General Prosecutor’s office. His gait is lumbering, as if dragging his misdeeds behind him. Wayne’s been charged with embezzlement, bribery of public officials, and tax evasion, more serious charges than his father’s. Apparently, he tried to bribe the incoming secretary of civic affairs—a desperate ploy to “influence” the KIDB chairman to roll over the debt owed by the group. Wayne has on a baseball cap, and he keeps his eyes down even as he holds his head up.

  As two prosecution officials lead him by the elbows to a spot for the press to take photos, a man with a red “United in Labor” bandanna rushes at Wayne. He hurls a bucket of what looks like cow dung at him. “Long live Ilsung Motors,” he shouts, as he’s wrestled away. A fireworks of popping flashbulbs as the Prince stands with shit dripping off his face.

  I click off the TV. I lie down sideways on the bed.

  An emperor without an empire. A business conglomerate out of cash, workers deprived of their jobs. A friendship robbed of trust. I think of Abuji. A life running out of breath.

  31

  March 31, 1998

  It’s a pale late winter afternoon. I walk outside my hotel to Namsan Mountain, in the heart of Seoul. The saplings along a ridge are still wrapped in their corsets of straw, the boughs bare.

  As I walk, I hold my breath, to feel what Abuji must be feeling. I want to know what it feels like to be running out of breath. When I asked him, Abuji said he felt faint, as if he’d spent hours blowing up balloons.

  The sword of IPF, the Lee curse, has hung over my adult life. A giant gleaming sword dangling from some dark, remote place high above, ever threatening to fall, make its mortal plunge. Now that it’s claimed Abuji, an abstract threat has the baldness of destiny for me.

  A wind howls down from the top of the hills. A spectral sound, of moaning spirits.

  Namsan is where Umma lost her parents and both her sisters. She told the story to Dongseng and me many times, adding layers of detail over the years. Summer of 1950, start of the 6.25 War, Umma would’ve been eleven when she was retreating with her family. The Democratic People’s Liberation Army, in a surprise attack, had charged across the 38th parallel at dawn on Sunday, June 25, and rampaged through to Seoul. Within a few days of the North’s invasion, the ill-prepared ROK Army lost 70,000 men of its 195,000-man force. By late June, it was in full retreat. The people of Seoul were forced to flee south toward Busan. Through her father’s connections, Umma’s family got a military escort.

  On their refuge journey, they were told to take temporary shelter in a small cave on Namsan, then the southernmost part of Seoul. President Syngman Rhee and his cabinet had already been evacuated from Seoul, and after they crossed the Han River, they ordered the army to blow up the Hangang Bridge to stop the North Korean Army from crossing south. The destruction of the only bridge tr
apped hundreds of thousands of Seoul residents north of the river. That was why Umma’s family had stopped, but they didn’t know this when they were huddled in the cave, her father, mother, and two sisters, along with the army detail.

  Umma was sharing a couple of rice balls her mother had prepared with her sisters. She remembers the sticky lotus leaf they were wrapped in, her mother’s special touch. Out of nowhere, mortars whistled in and burst all around them. Umma says she remembers then only the concussive booms and the ensuing deafness. Everyone around her was hit, almost everyone fatally. When she came to her senses, she found her mother lying limply on top of her, having thrown herself on her youngest daughter to shield her from the incoming fire. She turned her mother over, and a crimson flower blossomed across her white silk hanbok.

  Umma cradled her mother’s head in her lap for hours before she was rescued. She nearly suffocated because the mouth of the cave was closed up from the debris. Her unni’s corpse was dug up with arms missing. They never found her twin sister’s body. My mother was the sole survivor.

  Later she learned it was friendly fire, the Americans. But Umma never blamed them, or President Rhee. It matters little who or how, she said. She wondered more about the why. Why her? She often said her twin sister was the good one; she’s the one who should have lived. Why was her family killed, and why was she chosen to survive? Umma always ended the story with this question. A question that stayed with her, haunted her, over the years and decades.

  Umma still has shrapnel lodged in her neck and stomach. When I was little, I used to trace my forefinger along the jagged edge of the shrapnel through her skin. The shrapnel moved a bit when I pressed it. The dulled sharpness of a pain past. Umma’s own war mementos, which she carries around everywhere. She said they made her remember, always.

  I search for the cave. Not expecting to find any answers but just to see for myself. But I can’t find anything resembling a cave. There’s a long staircase leading up to a large library and, farther up, Namsan Tower. There are no remnants of battle amid the loamy earth. Still, I can sense it. There is violence and bloodshed and death buried in these hills. Souls entombed. Umma told us that on a still night, if you listen you can hear the muffled screams of anguish across Namsan. Ghosts of a cruel war that pitted brother against brother, son against father. Ghosts, too, of more recent warfare, waged by the torturers of the KCIA and its even more brutal successor Angibu on dissidents and student protesters in the 1970s and 1980s, right here in the bowels of these hills. How they wail, the ghosts of Korea’s cursed history, in smothered lamentation. But I can’t help feeling there is also redemption here. The sins of history not forgotten but, after all these years, maybe forgiven. Maybe that’s what gives Namsan its forlorn beauty, an unspoken reconciliation with the past forged by time and nature.