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VALUEVEST MANAGEMENT'S
MARK BAKAR AND JOHN BURBANK
(continued from preceding
page)
However, the family that controls the Samsung group didn't want them to sell it to anyone else. So they offered Shinsegae KW50,000 per share for the stake.
OlD: A stake that you think may be worth something between KW200,000 and KW600,000.
Burbank: Exactly. But the funniest thing of all was that the Korean analysts then used KW50,000 per share for Samsung Life's value when they did their calculations - not that anyone in Korea ever looks at asset value as a basis for valuing a company anyway.
OlD: Of course, who's to say they're wrong?
Burbank: You never know. Also, when you speak with these companies - or even visit with 'em - whether you speak Korean or not, you won't necessarily learn anything. They're not obligated to give you information - whether they're public or not. It's just not in their culture - at least yet - in part because capital up until recently had always been so freely available.
OlD: If the available information is truly that limited, how could potential buyers - outside the family, in any case - formulate an offer?
Burbank: Exactly. For Shinsegae to be able to sell its Samsung Life shares, it has to open its books to potential buyers. And they've been unwilling even to do that.
OlD: How did Soros and your friend manage to gather enough information to prepare an informed offer?
Burbank: That's a good question. I don't know. Maybe they have resources we don't know about. Maybe they weren't so well informed. And, of course, those stories could be inaccurate. But, again, one thing that we know for sure is Samsung Life's premiums.
OlD: Are there any undisclosed liabilities here which may have severely damaged its underlying value?
Burbank: Korean insurance companies tend to invest mostly in fixed-income instruments - although they do own some land and some equities, too. It's not like they're making loans to other companies.
OlD: But aren't Korean fixed-income instruments and equities generally down quite a bit in recent years - even more so those in severe distress?
Burbank: That's true. However, we understand that Samsung Life's exposure to equities and bonds is no more than 15% and 10%, respectively, and that close to half of its assets consist of loans to policyholders as a by-product of its long-term savings products.
OlD: In other words, loans against policies.
Burbank: Exactly. And aside from cash, that's probably the safest place they could be. So we don't think that Samsung Life is likely to go bankrupt any time soon. At the very least, they'd be among the last to do so.
OlD: Although I gather that you wouldn't be shocked were bankruptcies to be pretty darned widespread.
Burbank: Not at all. Quite the contrary. And there is another issue - which is Shinsegae's short-term debt. Shinsegae probably has KW550 billion or so of debt that
Page 10 of 14
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