Chapter 117 Leveraging a Ten Billion Company

He has no interest in being an investor.

I just want to be a partner.

First, use this company to dominate Wall Street. As for Hong Kong, use unicorn investment companies.

Although half of the money has to be shared, the risk is also shared.

Jerome pondered for a moment, "If you want to be a partner, how much investment do you need?"

"How many shares can I get if I invest 1 million US dollars?" Xu Luo said, "I am not just investing, but working with you to make things bigger."

Jerome thought carefully before saying: "10%."

"OK, then I will invest US$1.5 million and I want 15% of the shares." Xu Luo offered his price, "Man, I think this is a very good number."

Don't look at the fact that KKR traded US$380 million last year. However, about 60% of this capital came from loans from the original commercial banks, only about 10% came from the acquirer, and the remaining 30% mostly came from insurance companies.

.

They are just equivalent to traders.

Each business is charged a corresponding commission.

Jerome said: "I need to discuss it with the guys."

"OK, I'm waiting for your good news." Xu Luo said, "I'll wait for you outside."

After saying that, he got up and went outside, while Jerome called others into his office.

At first, Roberts and Jerome thought that the current situation was not optimistic and it was necessary to accept new partners.

Others believe that it is now December, and maybe it will be profitable next year.

After discussing for more than ten minutes, the remaining people also agreed to accept the new partner.

And connections and information are like a bankbook, they are the source of wealth.

Just like many companies in the United States employ retired CEOs as directors, these directors do not need to participate in the management and operation of the company every year and only need to introduce a few people.

What they receive is huge consulting fees, which are compensation for their extensive network of contacts and information resources.

Now being able to welcome someone who gives lectures everywhere seems to be helpful to the development of the company.

Although the shareholding ratio in hand will be dispersed, if the other party is a idiot, the shares can also be repurchased.

So when Jerome called Xu Luo to the office, there was an additional stipulation in the equity agreement, that is, Xu Luo must create income for the company, instead of waiting to be divided like a venture capitalist.

Of course Xu Luo had no objection to this, so he immediately signed his name.

And asked Chen Shurong to remit money to them through a multinational bank in Hong Kong.

In order to welcome Xu Luo to join, Jerome specially held a welcome reception.

After the reception, we started working.

Xu Luo asked Jerome: "How does the company operate now?"

Jerome: "?"

Did he just join the company without knowing anything?

But he still patiently explained: "It's mainly leveraged buyouts. You should know how to do leveraged buyouts, right?"

Xu Luo nodded, "I know about leveraged buyouts, but my idea is, why don't we look for companies where the management owns the company's shares? I think they will be more proactive and effective in managing the company."

"We, the partners, have to invest in the project ourselves, and more importantly, we have to make profits together with the acquiring management and their investors."

"In this way, we can achieve a win-win situation where everyone gets rich together and makes money together."

Hearing this, Jerome's eyes lit up. He had been thinking like this since he founded the company.

Unexpectedly, this young man had the same idea as him.

Xu Luo continued: "And if we only do business with a few hundred million dollars, it will be difficult to get huge returns. I think we should deal with big businesses."

"Large-cap business?" Jerome pondered for a moment, "As for large-cap business, I think you can really try it. I believe Mac you already have a general idea."

"I need to take a good look." Xu Luo agreed without a word.

After spending two days at KKR, he purchased a large number of newspapers and publications from the market. After careful research, he discovered the target company - Continental Petroleum Company.

This is an oil company exclusively controlled by the Morgan consortium. It is currently the ninth largest oil company in the United States. Continental Petroleum currently ranks fourteenth among the 500 largest companies in the United States.

Based on the current stock price, the company's current market value is between US$11 billion and its profit after tax is approximately US$1 billion.

The reason why I want to acquire this company is because three major events are currently happening in the United States that have a profound impact on the chemical industry.

The first thing is that because the inflation rate in the United States last year was as high as 15%, President Carter took the powerful medicine of "high interest rates".

As a result, the U.S. economy has been in recession since this year, and many chemical giants can only maintain less than 60% of their production capacity.

The second thing is that due to the oil crisis, the Organization of Petroleum Exporting Countries increased the price of oil. This move directly caused the costs of chemical giants in the United States to increase by nearly 40%.

The second thing is that the U.S. Congress stated that it will pass the [Excess Cleanup Act] with extremely high public support.

This bill would require chemical giants to provide a $1.6 billion trust fund over five years to clean up hazardous materials.

These three major events will prompt the chemical giants in the United States to put the energy crisis in an unprecedentedly important position.

In addition to these three things, junk bonds have also become popular in the financial world.

The English name is Junk Bond, or JB for short.

The famous Wall Street barbarian - Michael Milken has been promoting junk bonds since 1974.

So much so that junk bonds are now in short supply.

Sometimes acquisitions are all about the right time, place and people.

This statement is particularly appropriate now.

Xu Luo plans to use junk bonds (JB) to leverage the ninth largest company in the United States.

After confirming the goal, start preparing the purchase plan.

To put it simply, a few people from KKR first set up a shell company to execute the acquisition with a small amount of capital.

There are now 6 people in the company, and everyone provides about 30% of the total acquisition funds as the equity basis of the new company.

This 30% of the funds is obtained by applying for a secured acquisition loan from the bank using the assets of the target company as collateral.

The remaining funds will be financed by JB.

Under this capital structure arrangement, KKR's own capital accounted for 30%, but it obtained all the equity interests brought by the acquisition funds, and the rate of return on its own capital was magnified 5 to 10 times.

After the plan was completed, he gave it to Jerome.

Jerome was surprised to see that Xu Luo wanted to acquire Continental Petroleum Company.

Because he has never done such a big business before.

After reading carefully, Jerome asked curiously: "You don't plan to do a management buyout (LBO) model?"

This model specializes in using small sums of money to acquire poorly managed companies, and then working with management to reap staggeringly huge profits through restructuring.

Now Xu Luo is doing green extortion.

"No, I plan to launch a hostile takeover."

Xu Luo took out the pieces of information he had collected, and after Jerome read it carefully, he continued: "I think you must have noticed that the Morgan Consortium is closely related to the DuPont Consortium."

"If we launch an attack on Continental Petroleum, Continental Petroleum will have to look for a white knight, and the DuPont consortium is the most suitable."

"Your analysis is very well-founded." Jerome nodded, "We will have a meeting to discuss the feasibility. If it is suitable, we will start the project immediately."

Six people from the company sat down for a meeting to discuss.

The reason why Xu Luo likes Yiyantang is because he doesn't want to discuss everything with others. Although Yiyantang also has its disadvantages, if the discussion lasts too long, the day lily may get cold.

But now he has to rely on these five people. For example, looking for banks, JB, etc. all need manpower.

The six people discussed it for nearly an hour and finally decided to do it!

If you don’t make money, you’re a bastard.
Chapter completed!