Extraordinary Genius
Chapter 1035 – Problem
Wind and Rain Electronics and Philips’ technologies for LCD are one of the most advanced in the world. But all these while, Wind and Rain Electronics did not manufacture themselves. They had only let Philips’ factories help them produce.
Feng Yu has plans to set up a factory to produce LCDs. When his men are searching for a suitable factory to take over, someone from the higher-ups contacted him.
Sichuan’s Changhong Group is a listed company and China’s leader in TV manufacturing. They had owned over 60% of China’s market share, and their 21-inch TVs were exported to more than a dozen countries.
But now, Changhong had encountered a problem. They were too fixated on 21-inch color TV, as this was formerly their best-selling products, and kept increasing their production by buying more 21-inch color TV production lines.
However, the demand for color TVs had changed. Families are no longer interested in 21-inch color TV. Most families prefer bigger TVs, like 29-inch, 34-inch, etc. Changhong’s 21-inch color TVs are all obsolete!
This problem caused Changhong’s share prices to plunge. Their share prices had hit rock bottom, and those smaller factories that manufacture 19-inch, 17-inch color TV, immediately switch to producing PC monitors, and 17-inch monitors are the mainstream.
Changhong’s products are not selling and faced difficulties in switching to other products. They urgently need a solution.
The higher-ups are very concerned with these ‘market leader’ State-owned Enterprises. Furthermore, Changhong is listed on the China stock exchange. Someone from Changhong suggested to the higher-ups to let Wind and Rain electronics or Wind and Rain Home Appliances to enter a joint venture. Both companies can exchange shares or even merge.
When Jiang Wanmeng told Feng Yu about this, Feng Yu immediately frown.
If it were two years ago, Feng Yu would be happy to enter a joint venture with Changhong. At that time, Changhong’s workers, production lines, technical skills are all top-notched. Their company’s finances are also in good condition, and the Central Government is offering support to them.
But now, Changhong had hit rock bottom, and they are facing massive losses this year. Feng Yu is not willing to let Wind and Rain Electronics or Wind and Rain Home Appliances to enter any venture with Changhong. Still, he can consider exchanging some shares with them.
This company can be changed to manufacture LCD TVs and displays, but Zhong Qingxian returned with a piece of bad news. The other party is too greedy.
Changhong’s Chairman did not make any unreasonable requests. He only wants to work with Wind and Rain Home Appliances, to receive help with their technologies and sales channels. Changhong is confident that with Wind and Rain Home Appliances help, they can turn their losses to profits. If Changhong can get a sum of money to modify their production line, they can start production for 29-inch or 34-inch TVs. They can even start producing 17-inch monitors.
Changhong is requesting an exchange of shares and cooperation on an equal basis. But the government leaders among the higher-ups do not think so. Feng Yu had suddenly become Asia’s top tycoon, and his rise is too fast.
The leaders felt Tai Hua Holdings should belong to the Government. How can a socialist country have a capitalist like Feng Yu?! Although the ‘Great man’ had allowed some people to become rich, no one should become as wealthy as Feng Yu! Feng Yu is wealthier than some smaller countries!
Also, Feng Yu had parked more of his assets in an overseas registered, Wind and Rain Holdings. He is siphoning money out of the country. If Feng Yu decides to migrate in the future, it will be a serious capital outflow!
Even if the Government cannot control Tai Hua Holding, the Government should get a stake in it! We can offer some guidance to them and also send some of our men to manage them.
But the leaders are afraid Feng Yu will retaliate if they just invest in Tai Hua Holdings. None of them wants to bear this responsibility.
Some of the leaders suggested that if they cannot touch Tai Hua Holdings, they can start by buying stakes in Tai Hua Holdings’ subsidiaries.
If this succeeds, they can slowly swallow up Tai Hua Holdings from inside, and they might even get full control of Tai Hua Holdings in the future. If everything goes as plan, they might even control Wind and Rain Holdings!
So, this leader from the higher-ups said that Wind and Rain Home Appliances’ scale is too small, and Wind and Rain Electronics should be included in this merger. Yes. Wind and Rain Electronics and Wind and Rain Home Appliances should be merged into Changhong, and Changhong will own 60% shares of this new company. Wind and Rain Electronics and Wind and Rain Home appliances will co-own 40%.
Zhong Qingxian and Jiang Wanmeng immediately reject this proposal. Are you kidding me? Even if we are to merge, we should be the ones with the bigger stake. Our companies’ assets might not be a lot, but it is because we are not listed.
Furthermore, do we lack money? Our parent company can just inject funds anything to increase our companies’ value, and if you all want cooperation, no problem. But we must be in control!
……
“Old Zhong, Old Jiang, Old Guan, did the other party ask us to give them our reply anytime soon?”
Zhong Qingxian shook his head. “Not only they want us to give them a favorable reply as soon as possible, but they also hinted that if we reject this proposal, but Wind and Rain Electronics and Wind and Rain Home Appliances will also be in trouble.”
If Aiwa Electronics and Aiwa Home Appliances did not own Japan’s AIWA shares, these government leaders would also want to include them.
The government leaders knew a Hong Kong businessman owns shares of Wind and Rain Electronics and Wind and Rain Home Appliances, but they are not bothered. Hong Kong has already returned to China, and Hong Kongers no longer have any special status.
If this merger only involves Wind and Rain Home Appliances, Changhong should become the major shareholder based on their market value. But Feng Yu will not agree.
Now, the other party wants to include Wind and Rain Electronics and Wind and Rain Home Appliances into this merger and even threaten them. This pissed Feng Yu off. You all think that I am a pushover?
If Wind and Rain Electronics is included, it will no longer be the Wind and Rain brand issue. It will include VCD, DVD, Optical Drive, mobile phone, LCD, telecommunications, Smart home, etc. technologies, and international patents. Just the patents alone, they are worth at least 500 million USD!
Changhong is not worth much now, and how did those government officials valuate this company? How can they demand 60% shares of the company?
Send their management talents to help us with the management? They are just going to send their government officials over. Maybe it is these government officials who caused Changhong’s current situation.
“Who is the leader that demanded these demands? Which department is he from?”
“He is a leader from the State Administration for Industry and Commerce and is not from Changhong Group. We did not have any contacts with him in the past. We are also one of the key enterprises in the Province. Still, when we look for the leaders in the Province Government, they avoided us. They should have received instructions from the higher-ups!” Jiang Wanmeng replied angrily.
That’s right. Their companies had made money, but they had also made significant contributions to the Province. If they had invested their money elsewhere, or even overseas, the Province and the State will not receive any taxes from them!
They can convert their companies to overseas companies and return to China to invest. This will be more profitable as most Chinese still thinks overseas products are better.
Could it be the Government feels Feng Yu is earning too much money and wants to touch him? This should be impossible, as it will be more beneficial to the State to support him.
Feng Yu decides to find out what is going on with the top officials.
Translator’s notes: The ‘Great man’ is referring to Deng Xiaoping, and he mentioned about letting a small part of the population to become wealthy first, and these people will help the rest to become rich.
Changhong
https://en.wikipedia.org/wiki/Changhong
Capital outflow