Buying out the twenty-five-year Korean joint venture (2010)

Clearing up after a joint venture

A joint venture is an entry ticket to a market you do not know. For Hirose Electric in 1985, teaming up with Daeduck Industries was the realistic way to put up a plant and open customers in Korea. But the ticket remains after you are inside, as the other party’s shareholding. The loss on step acquisition of $21.6M (¥2bn) booked in 2010 was nothing other than the gap between the price of the half bought twenty-five years earlier and the price of the stake bought now — a loss best described as an admission fee paid in arrears.

What deserves attention is that buying the rest took four years and one month. Once it held 75% and had secured control, the operational purpose was substantially achieved, and there was no urgency about the remaining quarter. The measured steps — about 97% in 2012, 100% in 2015 — suggest a negotiation conducted with some regard for the other side’s circumstances. In the year after it took the whole of the equity, Hirose Korea’s net profit reached ¥5.03 billion, more than a fifth of Hirose Electric’s consolidated net profit of ¥22.9 billion.