Open Letter to LGE:
As one of 12,000 shareholders of Zenith Electronics, the following are factors listed why LGE should refrain from purchasing the remaining shares of Zenith:
1. Management control will not change. When LGE purchased majority control of Zenith in November 1995, LGE made a commitment to return Zenith back to prosperity and to set the stage where Zenith would become the number one CE company in the US. LGE placed its top executives at Zenith's management helm (with the exception of the CEO slot) and has been directing every major move of Zenith since the majority takeover. For LGE to state, two years later, that it has been unsuccessful in its mission and then to make an offer to purchase the remaining shares would be duplicious, rapicious and deceitful. Whether LGE owns 55% or 100% of Zenith, nothing changes concerning management control.
2. Foster additional international partnerships. LGE seeks partnership relationships with other global players and Zenith is its shining example of a successful partnership relationship. For LGE to gut out Zenith and pick up the pieces on the cheap would be a clear sign to every other global company to keep at long-arms distance from any partnership relationship suggested by LGE. LGE would be known as the Microsoft of the CE industry: today's partner, tomorrow's carcass.
Once HDTV and SDTV sets, digital STB's, Divx players and digital cable modums are introduced and sold by Zenith, earnings of Zenith should sky rocket and so should the price of ZE. At that point, LGE could sell just 20% of its Zenith's shares to a global partner and entirely recoup all its ZE investment and bring in another global partner such as Siemens. With the combined forces (cross sales, cross distribution, etc.) of LGE, Siemens and Zenith, control of 25% of all CE sales worldwide would become an attainable objective. On the other hand, LGE against the world would be a very risky play. Global partnerships certainly will be the major commercial force of the 21st Century.
3. Increase opportunities for cross sales. With two separate corporate entities, LGE and Zenith can engage in favorable cross sales and each specialize in specific areas of expertise concerning manufacturing, R&D and distribution.
4. Two global brand names are better than one. With LGE's total ownership of Zenith, the perception among purchasers would be that Zenith is just one among scores of Asian companies with no real differentiation. American brand names have clout both at home and abroad and should be capitalized on by both Zenith and LGE. Also, the competition would have a much more difficult time fending off two strong brand names and producrt offerings than one LG brand.
5. Also reward Zenith's minority shareholders. Over 12,000 minority shareholders of Zenith have been patiently waiting for years for the introduction of HDTV by Zenith with the hope of earning a good return for their long-term loyalty to Zenith. Pulling the rug out from them at this 11th hour would be a very cruel act. Minority shareholders would initiate humongous class-action lawsuits tying up the takeover attempt for years and tearing down all the goodwill that LGE has so assidiously been accomplishing.
6. Risk putting ZE in play. By making an offer to purchase the remaining ZE shares, LGE would risk the very real possibility of putting ZE into play. Other corporate suitors may jump in and make an attempt to purchase the remaining 45% on the cheap.
All indications to date are that the management of LG and LGE are very intelligent, honorable and far-sighted leaders who all are focused on the mission of making LGE the number one CE company in the world in terms of both sales and corporate integrity/responsibility. My fervent wish is that they will continue this path and that this will remain a win/win partnership to all concerned. |
