Crash landing for Hong Kong's
superboy By Kent Ewing
HONG KONG - The latest Hollywood version
of the Man of Steel - Superman Returns -
opened here this month. Predictably, it's a big
hit. Less successful, however, has been the return
of Hong Kong's own Superman - the aging
billionaire tycoon Li Ka-shing - to the headlines
of this city's newspapers and nightly newscasts.
Actually, the star of this episode of the
ongoing, ever-enthralling Li family drama is the
patriarch's second son, Richard, who in his
brighter moments (which do not include this month
or even the past few years) has been called
"Little Superman".
Eager to sell his
onerous 23% stake in PCCW Ltd, Hong Kong's largest
telecommunications provider, the younger Li struck
a corrupt bargain with a longtime friend and
factotum of the Li
family, investment banker
Francis Leung, not only further tarnishing his own
reputation and that of his father, but also
bringing lasting shame to Hong Kong-the
business-friendly city to which the family owes it
prodigious fortune.
The PCCW fiasco, as
well as other misadventures of Little Superman,
adds up to a story of a rebellious, overreaching
son who wants desperately to outdo a legendary
father, but has wound up embarrassing them both.
Local lore has it that a front-page
photograph of the elder Li, now 78, sells more
newspapers than the image of any pop or movie
star, local or international. In a city where
tycoons are royalty, Li is the king. With a net
worth estimated at US$18.8 billion, Li is Hong
Kong's richest man and, according to Forbes
magazine, the richest person of Chinese descent in
the world. In the magazine's annual rankings of
the world's wealthiest people, Li placed 10th in
2006. Not bad for a high-school dropout who
started out sweeping floors in factories he could
later afford to buy.
A native of Chaozhou,
a coastal city in southern China, Li was only 12
when his father died shortly after his family had
fled China in 1940 during the Japanese occupation.
He left school and went to work in a plastics
factory, often logging 16-hour days. Eventually,
through hard work and ingenuity, he started his
own company, called Cheung Kong Industries, which
manufactured plastic flowers.
Now known as
Cheung Kong (Holdings), the conglomerate, which
was first listed on the Hong Kong Stock Exchange
in 1972, has acquired other major companies, such
as Hutchinson Whampoa Ltd and Hong Kong Electric
Holdings Ltd, and expanded to include a vast
real-estate empire. All total, Cheung Kong
controls eight other Hong Kong companies that
account for about 10% of the Hong Kong Stock
Exchange by market value.
Outside his home
city, Li's business interests span the world and
include hotels, telecommunications, finance and
investments, ports, e-commerce, media,
biotechnology and more. In addition, the Li
Ka-shing Foundation, established in 1980, is one
of the largest charitable organizations in the
world, awarding grants and sponsorships totaling
more than $1 billion, mostly in the fields of
education and medical research.
If anyone
has come to embody Hong Kong's raw capitalism and
entrepreneurial spirit, it is Li. From a humble
birth, he has made himself a king who has the ear
of prime ministers and presidents.
If
anyone has come to represent spoiled,
silver-spoon-in-the-mouth privilege and arrogance,
however, it is his son, Richard, 39. While his
father's hard work and business savvy have
gradually turned a large portion of Hong Kong into
Li Family Inc, Richard's hubris has served as a
crude and all-too-frequent reminder of that fact.
The high-flying youngest son has been in
the news so much lately that his older brother -
the much more dutiful Victor, 41 - has been almost
forgotten. It is Victor, Cheung Kong's managing
director, who is the chosen heir to his father's
empire.
The alleged victim of a kidnapping
10 years ago by a notorious gangster known as Big
Spender - neither he nor his father ever publicly
acknowledged that the abduction occurred - these
days Victor maintains a low profile and tries to
keep his wife and their three children out of the
media spotlight.
Victor has also done very
little in the business world to step out of his
father's long shadow. He has attempted only one
major transaction on his own - an ultimately
failed bid on a $552 million stake in Air Canada
in 2004 - showing none of his father's famous
flair for cutting great deals.
Instead, it
has been Richard who has set off on his own to
prove he is the great man's equal. But the
brilliant young entrepreneur who in 1999 turned
tiny telecommunications distributor Tricom
Holdings into the region's top Internet company,
PCCW, has become the bad boy of the Hong Kong
business elite.
The "boy wonder" myth
started back in 1990. Then, using a loan from his
father, Richard founded Star TV, Asia's first
satellite broadcasting service. In 1993, at the
tender age of 26, he sold Star to Rupert Murdoch's
News Corp for $950 million, turning a $400 million
profit. A new Li legend was born.
The
young Li, the most eligible bachelor in Hong Kong,
burnished his reputation further by using the
proceeds of the Star sale to launch PCCW, which in
2000 took over Cable and Wireless Hong Kong
Telecom, the city's dominant fixed-line operator.
Since, PCCW has launched the broadband TV network,
Now TV, and reentered the mobile phone market by
acquiring a company called Sunday and creating its
own new brand, PCCW mobile.
At its height,
PCCW stock recorded a 1,286% gain in a single day.
Instead of the familiar visage of the elder Li, it
was Richard's face that then graced the covers of
Time and Fortune magazines.
What went
wrong? The falsification of his educational
credentials on his company's website put a dent in
the armor: PCCW claimed its boss was a graduate of
Stanford University, but the university flatly
contradicted that claim. Ungraciously, the callow
tycoon blamed his staff for the mistake and moved
on to the next mega-deal.
Of all the deals
that the young Li has made, none is more infamous
than the white elephant known as Cyberport, a $2
billion, 240,000-square-meter venture that was
supposed to turn Hong Kong into an international
IT hub. Instead, Cyberport has become a monument
to the Hong Kong government's collusion with the
business elite, as PCCW was allowed to build the
project on prime real estate without competitive
tender. Six years after PCCW struck its one-sided
deal with the government, Cyberport's occupancy
rate remains less than 50%. For overcrowded Hong
Kong, that qualifies as a cyber ghost town.
When PCCW shares started to tank because
of investors' fears that the company had lost
focus and spread itself too thin, Little
Superman's reputation suffered a further blow. But
his struggle to extricate himself from his losses
has caused even greater damage - both to him and
to his family.
The sale of the younger
Li's 23% stake in PCCW to a family friend who
might very well be backed by his father at the
behest of the Chinese government is perhaps the
most disturbing example yet of business-government
collusion in what the US-based think-tank, the
Heritage Foundation, calls the world's freest
economy.
PCCW's chairman may have thought
he had found a way out of his underperforming
burden when both Australia's Macquarie Bank and
TPG-Newbridge, an arm of the US-based Texas
Pacific Group, made attractive offers. But the
Chinese government, wary of foreign ownership in a
Hong Kong telecommunications company, apparently
vetoed any possible deal. State-run China Netcom
is PCCW's second-largest shareholder with a 20%
stake. After the apparent China veto, Leung
stepped on to the scene to buy the 23% stake for
$1.2 billion in a shadowy deal that sent the
company's stock plunging. Leung will borrow 70% of
the acquisition price from Singapore-listed
Pacific Century Regional Developments, a company
75% owned by the younger Li, and he has not
explained where the remaining 30% will come from.
But cynics are openly wondering: wherever the son
goes, can the old man be far behind?
As
things stand, the PCCW chairman will resign his
position, hold onto a privately held 3% stake in
the company and walk away with a reported $991
million in his pocket.
Meanwhile, minority
shareholders, who own more than half of PCCW, are
left lamenting how much better they would have
made out in a more lucrative deal with either
Macquarie or TPG-Newbridge, both of which were
reported to offer as much as $7.7 billion for
PCCW's telecom and media assets.
The
outrageousness of the deal has stirred Hong Kong's
mini-parliament, the Legislative Council into
action. Two Legco panels - one concerned with
information technology and broadcasting and the
other with financial affairs - will hold a joint
meeting early next month to investigate the
"possible irregularities" of the transaction.
"There has been lots of speculation in the
media on who is really behind Leung and whether
the Chinese government or some tycoons are
supporting his bid to take over control of PCCW,"
legislator Albert Cheng said.
"I'm sure
questions will also be asked about why PCCW has
accepted Leung's purchase price offer, which is
much lower than those of Macquarie Bank and
TPG-Newbridge, and whether an agreement with Leung
is the most beneficial to PCCW minority
shareholders."
Since Legco does not have
the legal authority to summon private businessmen,
however, the meeting is likely to be a talk shop
with no serious follow-up. Still, how embarrassing
- for the Li Family, for Legco and for Hong Kong.
When all is said and done, Superman (and Superboy)
will no doubt fly again.
Kent
Ewing is a teacher and writer at Hong Kong
International School. He can be reached at
kewing@hkis.edu.hk.
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