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LIG Nex1 / Goldstar Precision

LIG Nex1 is the leading defense company in Korea. Since its establishment in 1976 as Goldstar Precision, the company led Korean defense industry by developing and producing state-of-the-art weapon systems in various areas and has contributed greatly in Korea having self-reliant defense capability. LIG Nex1 is a major Korean defense contractor and develops a range of military systems used in warships, jet fighters, submarines, tanks and armored vehicles. It also supplies guided missiles and radar systems to the South's military.

In 1983 the company was renamed into Goldstar Precision. In March 1986 Goldstar Precision made a technical agreement with Canon, in an attempt to take on the near monopoly of the Samsung-Minolta combination. The GoldStar and Goldstar Precision names have subsequently been used by a number of un-related companies. The company was subsequently known as LG Innotek and then NEXFuture1. It was renamed into LG Precision in 1995. In 2000 the company was renamed into LG Innotek, and the year 2007 saw inception of LIG Nex1. LIG Nex1 is wholly owned by LIG Holdings Company, which in turn is owned by the LIG Group. The LIG Group is owned by the LG corporation, one of South Korea's largest conglomerates. The Lucky-Goldstar Group, one of the four major business groups in Korea, maintains a rather low pro?le compared with the other three groups.

In 2013, South Korea conglomerate LG sold a 49% stake in LIG Nex1 through its subsidiary LIG Corporation to eight private equity investors for W420 billion. The price equated an implied equity value of W857 billion, or 36.9 times price-to-earnings. According to the terms, LIG is required to take LIG Nex1 public by the second half of 2016, or the PE investors will have the right to purchase the remaining 51% in the company. The private equity investors were STIC Investment, Hana Daetoo Securities, Dongbu Securities, KB Asset Management, Daishin Securities, Heungkuk Asset Management, KTB Private Equity and AJU IB Investment.

In August 2015 the Agency for Defense Development and military contractor, LIG Nex1, are under investigation over alleged irregularities in the development of a portable anti-tank guided missile. Investigators of a joint government team investigating defense industry corruption raided the agency in Daejeon, and the headquarters of LIG Nex1, hired to advance the missile's development, in Yongin, Gyeonggi Province, and three other institutes related to the project.

They secured documents regarding the development of the mid-range infantry guided missile, named "Hyeongung" or "Raybolt." Raybolt is the first anti-tank guided missile developed and produced by Korean contractors using domestic technology, and was expected to upgrade the Army's military strength. The raid came a month after the Board of Audit and Inspection (BAI) detected an alleged supply of faulty products.

According to the Board of Audit and Inspection, three former and incumbent Defense Acquisition Program Administration officials gave favorable contract conditions to LIG Nex1 in return for a range of kickbacks and favors. In connection with the findings, in January 2018 BAI requested criminal investigations into three former and incumbent DAPA officials, one LIG Nex1 official and another at a supplier of the company. The BAIs findings showed that in 2012, DAPA signed on LIG Nex1 as the supplier of three components of the mid-range surface-to-air missile Cheongung system in a single contract, despite having concluded that separate contracts would provide better terms for the state agency.

In August 2015 LIG Nex1 offered a total of 6.9 million shares in the Reg S IPO, including 2 million new shares and 4.9 million existing shares sold by shareholders. The IPO could raise a maximum of W524.4 billion, based on the indicative price range of W66,000 – W76,000 per share. LIG Nex1’s relatively conservative pricing makes it a good substitute for competitors like Korea Aerospace Industries and Hanwha Techwin, defence contractors for the country's armed forces. At W66,000 – W76,000 per share, LIG Nex1 is valued at 28.7 – 33.0 times 2014 earnings, or a discount of 40% – 48% against Korea Aerospace which trades at 54.8% price-to-earnings. Hanwha Techwin, meanwhile, reported a loss in 2014.

Lucky-Goldstar Group

LG - Lucky Goldstar - is the abbreviation of the company's tagline, Life's Good". LG Corp. is a conglomerate in South Korea that deals in the production of telecommunications products, chemicals and electronics. One of its subsidiaries, LG Electronics, is one of the biggest players in the world market for mobile phones and HDTV sets. In the market of mobile phones, at one time it was the 3rd largest producer, making it one of the big dogs in the global mobile phone industry. This is why LG Electronics was the flagship company of the aforementioned conglomerate, LG Corp.

Goldstar Co. was created in 1959 as part of the Lucky-Goldstar chaebol. Chaebols are massive groups of interrelated companies that dominate South Korean industry. Rising to prominence after the Korean War, South Korean chaebols were founded and operated by prominent, or "royal," families. Different chaebols generally concentrated on separate markets, such as those for chemicals or automobiles. Throughout the middle 1900s, chaebols were characterized by hierarchical, centralized control, which was usually exerted by members of the founding family. Chaebols traditionally had a central planning division, or secretary's office, which was directly subordinate to the chaebol chairman. The office would oversee all of the group's activities and was responsible for strategic management. In the early 1990s, the four largest chaebols--Samsung, Hyundai, Lucky-Goldstar, and Daewoo&mdashcounted for nearly half of Korea's total gross national product and about 40 percent of the country's total exports.

In a country where nepotism rather than being considered unethical or dishonourable is standard practice, LG flourished, becoming a globally known brand with more than 40 affiliates in electronics, home appliances, chemicals and telecommunications, and the Koos have got rich. The company was originally named Lak Hui (pronounced "Lucky"). Koo In Hwoi, founder of Lucky-Goldstar Group, began his business in 1940 by establishing "Kooin Shop". In 1947 the roots were layed, with the chemical company Lak-Hui Chemical Industrial Corp, which is today one of the divisions of the LG Conglomerate (LG Chem). The original logo from represented the letters "L" and "G" symbolised as a smiling face - a synonym for the companies philisophy to produce products the make everyones life better ... Life's Good.

Lucky-Goldstar at one time was synonymous with el cheapo bargain basement goods. Goldstar Co., Ltd. is the largest manufacturer of electrical appliances and consumer electronics in South Korea (Republic of Korea). By the year 2010 revenues were $89.5 billion employing 186,000 people. It led domestic production of major appliances like televisions, refrigerators, and washing machines, and was also a major global supplier of semiconductors and liquid-crystal displays in the mid-1990s. With approximately $6 billion in 1994 sales, Goldstar formed the primary division of the giant Lucky-Goldstar chaebol, or business group.

Formed in 1947, Lucky-Goldstar was the third-largest chaebol going into the 1990s. Formed by the Koo and Huh families, the chaebol started out selling face creams and quickly grew to become dominant in the national chemical manufacturing business. Like other chaebols, Lucky-Goldstar achieved strong growth during the 1940s and 1950s through extremely hard work. The chairmen and founders of the chaebols, in fact, were known for working relentlessly--even putting in 16-hour days for years on end without a vacation&mdash make their business groups leaders in their respective industries.

Lucky-Goldstar's revenues rocketed more than five-fold to $22 billion between 1980 and 1989. Much of that gain was attributable to electronics, which was supplying more than 30 percent of Lucky-Goldstar's revenue by the end of the decade, while 25 percent came from chemicals and 33 percent from various trade and financial services companies.

The Goldstar company was established in 1958, and by 1959, it had already produced the very first radio in Korea. It was the start of the electronics industry in the country. The company went on to produce several other electronics products for the next 10 years like telephones, refrigerators and TV sets. By its 10th year, Goldstar has already produced its first air conditioner and established a branch in New York City. It was the start of it global dominance in electronics.

During the 1970's, Goldstar reached the 100 billion won mark and became the first company to attain $100 million in exports. In its 20th year, 1978, Goldstar established its subsidiary in the US that handles sales. The freight train of success for the company did not end there. As it entered the 80's, it also established its first production subsidiary overseas. By the mid 80's, the company has already surpassed 1 trillion won in sales. And things were just going to get better.

Because the Korean government restricted access to overseas financing sources, Goldstar was forced to fund much of its growth during the early and mid-1980s with loans from short-term domestic financiers. The unfortunate result by the late 1980s was that Goldstar was paying out more than 85 percent of its operating income to cover interest on its massive debt load.

The company's slow hierarchical decision-making process had become obsolete in the fast-moving global economy of the 1980s. Goldstar was still mostly family owned by the late 1980s and run by the original founder's eldest son, Koo Cha-Kyung. "It would take days to make the most simple management decision because it [management] had to have the chops of everyone from the responsible manager right up to even the president at times," noted an industry analyst in the April 1991 Business Korea. By the end of the 1980s the group of 31 separate companies had simply become too unwieldy for Koo to manage well.

Recognizing the urgency of the situation, the 62-year-old Koo took drastic measures beginning in 1989 to turn the ailing Lucky-Goldstar around. Koo transferred control of Goldstar to Lee Hun-Jo, a 27-year Lucky-Goldstar veteran, who set about transforming the company from a struggling electronics manufacturer into a global high-tech competitor. In 1992, the company merged with Goldstar Components. Then in 1995, it merged with Goldstar communications, acquired the company Zenith and changed its name officially to LG Electronics, signalling its intention to become one of the biggest and most successful corporate entities in the world.

On 01 March 2003, when LG launched its comprehensive holding company, LG Corp., the group committed itself to overcoming chronic problems that most of the chaebol had in governance, especially that of the constant circulation of investments between subsidiaries. After the premature death of his only son in the 1990s, current Chairman Koo Bon-Moo, who had two daughters, went to great lengths to sustain the family tradition of the eldest son becoming the next Chairman. In 2004 he adopted his brother Koo Bon-Neungs son, Koo Kwang-Mo, who had quietly been acquiring shares in LG Corp. ever since.

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Page last modified: 29-11-2018 18:52:13 ZULU