When Samsung Display Co. Ltd. tapped Paul Hastings Seoul partner Daniel Kim to guide it through a restructuring of its nearly two-decade relationship with U.S. specialty glassmaker Corning Inc., he knew what to expect.
“These guys seem like they don’t do any easy transactions,” he says.
Samsung and Corning first formed Samsung Corning Precision Materials, a joint venture to manufacture glass for flat-panel displays, 18 years ago. But an agreement announced late last month fundamentally alters the deal. Corning gets full ownership of the JV, while Samsung gets convertible shares that potentially give it a 7.4 percent stake in Corning itself.
The deal has been widely hailed as a win-win for both sides. Corning will gain access to $1.2 billion in cash held by the JV, and will also see a boost to revenue. Samsung potentially gains a stake in a company that is a key supplier both to it and to competitors such as Apple Inc.
Samsung will give up its 43 percent interest in the JV in exchange for $1.9 billion in convertible preferred shares and will pay another $400 million for additional convertibles. There are several other terms, including a 10-year supply agreement and technology collaborations on product development and commercialization initiatives.
The closing checklist alone, which lawyers referenced to make sure all pieces of the agreement were in order, was about 37 pages long. “Normally it would be half that size,” Kim says.
He says a particular challenge was hammering out a deal by which the shares would not be convertible for seven years. Typically, parties to similar deals are given the right to convert their shares immediately, but Samsung and Corning decided that a deferring convertibility would be beneficial to their future business relationship going forward. But the novelty of the arrangement meant spending a lot of time researching precedent for similar deals under New York law, which governs the companies’ deal.
“There really wasn’t a market precedent,” Kim says. “It took a lot of creative thinking from both counsels and both parties to really bridge that gap”
Kim acted for another Samsung company, Samsung Electronics, in 2011 when Paul Hastings helped to arrange a similarly complex deal that involved carving out its disk-drive business and selling it to Seagate Technology Plc. for $1.4 billion. Kim was a partner in the Hong Kong office at the time, before the firm opened an office in Seoul last year. He had first joined the firm in Hong Kong as a mid-level associate in 2002 in order to work with Kim, who had launched a Korea practice by himself just months before.
“It was a Korea practice of one before I joined,” he says. “We went from two to now 10 Korea-focused attorneys in Asia, with eight of ten based in Seoul.”
It wasn’t just the deal’s complexity that was weighing on Kim and his team—which also included partners in New York. It was also the short timeline to get things done. Kim says they were under pressure from both companies to finalize the arrangement because of upcoming quarterly earnings announcements and other deadlines set by their investor relations teams. So they chose a meeting point in between New York and Seoul, in San Francisco, and holed up in a conference room for nearly two weeks to hammer out the final parts of the deal.
“That meant working 20 to 22 hours a day for ten days,” Kim says. “I didn’t think that was possible in order for a human being to function.”