Sony only had an office in Shanghai and did not set up a subsidiary in China. Sony only enters the Chinese market aggressively after 1996.
At Sony’s office, Feng Yu was slightly disappointed. The office does not look like an office for a world renown brand. The Machinery Company had a more spacious office than this.
This was because of the difference in mindset. The US and Europe would set up spacious and comfortable offices, and Japan and other Asian countries would try to make full use of their spaces. After all, Japan’s property prices were the highest in the world for the past two years. In the future, China’s property would be more expensive than Japan.
Another reason was that Sony was cutting cost and they even stop hiring. They could only prevent retrenchment this year.
Japanese firms had an interesting rule. It was similar to the future state-owned enterprises. The first employment contract would be more than 10 years and the second contract will be lifelong, until retirement. Even if you did not perform well, you would not be asked to go.
These types of companies also had a tradition of doubling the salary of male employees after they got married. The reason was that the male employees have to take care of his family and his wife could stay at home to take care of the children. But if you used your family as an excuse for not doing your job well, the company can ask you to go.
If the economy was not good, what would the company do? First, the company would retrench the “part-timers” and not those under lifelong employment. Among those retrenched, foreigners, mainly Chinese, made up most of the workers. Secondly, the company would have a talk with the employees to tell them about the company’s difficulties and request to employees to resign on their own accord. The company would also offer some compensations. In 1987, Aiwa Co. had used this method for their retrenchment excise, and they cut their employees from over 3,000 to about 1,000.
Feng Yu sat down in Norio Ohga’s office, and someone served them tea. Norio Ohga: “Mr. Feng, before we start the negotiations, I want to ask you how much do you know about Aiwa?”
Feng Yu briefly told Norio Ohga what he knew about Aiwa. Of course, Feng Yu did not mention anything about Aiwa success in two years’ time. He only talks about Aiwa’s history and how he wishes to lead Aiwa out of its current situation.
Norio Ohga frowned. Lead Aiwa? This Chinese man wants to be Aiwa’s president? But based on the agreement between Sony and Aiwa, even though Sony was the major shareholder of over 50% shares, Sony could not interfere with Aiwa’s operations and Aiwa’s president would be Heitaro Nakajima.
Feng Yu purposely frowned when he heard Norio Ohga: “Is this the case? Aren’t Sony Aiwa’s controlling shareholder?”
“No. We only have slightly more than 61% of Aiwa’s shares and do not have the controlling stake. But rest assure, Heitaro Nakajima is a capable person, and you do not need to worry about losing money after you bought the shares.:
“Really? But I heard that under his leadership, Aiwa had been losing money for consecutive years and is currently in debts of over a billion Yen.” Feng Yu retorted.
Norio Ohga was embarrassed. He did not expect Feng Yu to know about this. That’s right. Even though Aiwa was doing better now, it was still in debt. It would be hard for someone to believe that a company with liabilities several times more than its value to recover.
If it were not because of the market share, Sony would have withdrawn their investments from Aiwa. But Heitaro Nakajima had threatened Sony that if Sony does not inject funds into Aiwa, he will approach Panasonic and other companies. Aiwa would also not work with Sony to control the market!
“Mr. Feng, two banks own about 6% of Aiwa’s shares. With our shares, that would be 67%, and you will have the controlling stake. You can do whatever you want with the company then.”
Feng Yu continued with a satisfied expression: “So, Mr. Norio agrees to sell me Aiwa’s shares?”
Norio Ohga replied with a difficult expression: “Before we talk about this, I wish to discuss another matter with Mr. Feng. Which company do you think produces the world’s best Walkman? Does China have any good Walkman?”
Damn. How shameless. Are you asking me to praise you?
In Feng Yu’s past life, he heard that many companies firmly believed their brands were the best, even when they were selling their brands. If the other party did not praise their brands, the company would not sell. For example, the sales of Volvo to Geely.
Feng Yu did not expect the Japanese to act this way too. Currently, everybody knew that Aiwa’s music quality was better than Sony.
Feng Yu said: “Sony is number one and Aiwa can only be considered one of the top three. As for China, there are no quality Walkman manufacturers.”
Because of China’s defense against spies, the tape recorder produced can only be considered a music player and there was no record button. Now, this regulation was relaxed, but small portable music players still cannot have a recording function. Only China’s Internal Security Bureau could use recording pens.
“Mr. Feng, I have no intentions to look down on China. But currently, Sony and Aiwa are the world’s best Walkman brands. Sony and Aiwa have an agreement to work together as friendly competitors and to keep other companies like Panasonic and other brands out of the Walkman market. I hope you will continue with this agreement after we sell you Aiwa’s shares!”
Continue the alliance? That was what Feng Yu was hoping for. If Sony decided to inject more resources to capture the market share, they might suffer losses, but Aiwa would be finished.
Feng Yu’s current strength was not enough to compete with an MNC like Sony. By working with Sony, he could compete with Panasonic, Toshiba, and other brands.
The Walkman market currently was divided into 3 parts. Sony was the leader and control about 40% of the market. Aiwa was second and owns about 30% of the market share. The rest was divided among the rest of the companies.
“Fine. I agree with this brand alliance. Mr. Norio still have any other questions? Can we start talking about the price of the shares?” Feng Yu pretended to consider this condition and agreed. He would be an idiot if he did not accept.
In two years’ time, Sony would regret. The Walkman market would no longer be divided into 3 parts, and Aiwa alone would occupy more than 50% of the market!
“20 million USD. I can persuade the shareholders to sell the Aiwa’s shares owned by Sony to you.”
20 million USD? Fuck. You think I don’t know about Aiwa’s market value? Feng Yu could accept premium prices, but he would not accept an amount that was more than 3 times the value!
“Mr. Norio, Aiwa’s debt is not a small amount. If you are able to clear Aiwa’s debt now, I can accept 20 million USD. Aiwa’s market value is not even 1.2 billion Yen and how did you come up with 20 million USD? If you include Aiwa’s debt in it, then 5 million USD is my highest offer!”
Based on the shares proportions, Sony would be responsible for over 15 million USD in debts, and the shares were worth about 6 million USD. Feng Yu’s offer was also too low.
Norio Ohga laughed embarrassedly: “Mr. Feng, we will not pay the debts. Our company’s finance is currently under a lot of stress. But 5 million USD for Aiwa’s shares. We cannot accept anything lower than the market value. How about 10 million USD? I can convince the shareholders and sign the sales contract with you as soon as possible.”
“Mr. Norio, you sure you are able to convince the shareholders?”
“There should be no problems.” Norio Ohga was thinking, Feng Yu does not know how badly those shareholders want to sell off Aiwa’s shares. When he suggested to buy over Aiwa complete and inject funds into the company for the second time, he was scolded by the shareholders.
“Then I will increase my offer slightly. 6 million USD.”
One party wished to buy badly, and the other party wanted to sell since ages ago. The negotiations went smoothly, and in less than an hour, the final price was settled. 7.2 million USD.
The price was about 20% more than the market value but compared to the Aiwa’s profits in two years’ time, it was a small amount!
