Chapter 602
The Growth of the Third Generation
Starting this year (1988), Chen Zerui, the third-generation 'eldest grandson' of the Chen family, officially became a director of Hutchison Whampoa, entering the ranks of senior executives.
Hutchison Whampoa is essentially a diversified subsidiary of CK Asset Holdings, with businesses including: power and energy (Hong Kong Electric, Husky Energy), retail and manufacturing (Watsons), port and communications (International Ports, Hutchison Telecom), investment and trading (Hutchison Investment, Watsons Trading), real estate leasing (Hutchison Properties), and satellite communications.
On the eve of last year's stock market crash, Hutchison Whampoa successfully raised HK$50 billion, with its major shareholder, CK Asset Holdings, subscribing according to its shareholding. This successful fundraising gives Hutchison Whampoa greater strength to expand.
Central, Hutchison House.
Simon Murray chaired a high-level meeting of Hutchison Whampoa. The meeting room was almost entirely filled with foreigners, but there were also two Chinese faces – Canning Fok and Chen Zerui.
At this time, Hutchison Whampoa was in a phase of "expanding overseas" and was acquiring well-performing assets around the world.
In the UK, they attempted to acquire a listed company, but faced opposition from major shareholders and ultimately exited with a profit of HK$2 million. However, they invested in mobile communications and paging networks in the UK, thus establishing a foothold there.
In Canada, the acquisition of Husky was successful, and the company oversaw Husky's efforts to buy up oil resources at rock-bottom prices.
Of course, Hutchison Whampoa also has a lot of investments in Hong Kong. At the end of 1986, it acquired four berths at Kwai Chung Container Terminal No. 8 for a sky-high price of HK$42 billion, bringing its total to 12 berths and accounting for more than 4% of the berths at Kwai Chung Terminal.
At the start of the meeting, Ma Shimin said, "Another Canadian oil company, Canterra Energy, is planning to sell. Given Husky's consistent buying of resources like oil wells at rock-bottom prices, acquiring such a company would make expansion easier. The seller is asking for 3.8-4 million Canadian dollars. Does anyone have any thoughts?"
One US dollar is equal to slightly more than 1.2 Canadian dollars.
So this deal is worth nearly US$5 million, or about HK$40 billion.
Of course, the acquisitions are made by Husky, which usually uses its own funds and loans.
Before anyone could speak, Ma Shimin said, “Alright. Victor will come to Canada with me later to participate in Husky’s acquisition. If this acquisition is successful, Husky’s assets will double compared to 1986.”
After saying this, Ma Shimin showed a very good smile, clearly pleased with his deal.
As a Hong Kong company with Chinese capital as its major shareholder, Hutchison Whampoa's acquisition of financially sound and sizable companies like Husky in Europe and America is undoubtedly a great success.
Next, Chen Zerui offered a suggestion: "After the 1987 stock market crash, Hong Kong citizens were terrified of stocks, and the value of Hong Kong Electric was greatly underestimated. Hutchison Whampoa could take this opportunity to increase its stake in Hong Kong Electric."
The Hong Kong Stock Exchange stipulates that a full takeover bid must be issued if the shareholding exceeds 35%, so many major shareholders hold shares of 34.7% or more. However, it is not impossible to increase the shareholding to a higher level. For example, if the company's market value is significantly undervalued and the highest share price in the past six months is acceptable to the major shareholders, they can take advantage of the situation to increase their holdings.
After the 1987 stock market crash, Hong Kong Electric's share price plummeted. By simply waiting six months for Hutchison Whampoa to begin increasing its stake, it was possible to avoid a takeover offer.
It's very simple. The stock price has been so low for the past six months. Even if you launch a full takeover at the highest price in the past six months, the other shareholders will not sell to you.
Ma Shimin pondered for a moment. He could be considered to have "great power" in Hutchison Whampoa, but the real power was still in the hands of the Chen family. For example, the "rights issue" on the eve of the 1987 stock market crash was scheduled by the boss, Chen Wenjie, which also proved that he had excellent foresight. If it had been delayed until after the 1987 stock market crash, then absolutely no one would have been willing to participate in the rights issue.
Simon Murray wasn't actually enthusiastic about this move to increase his stake in HK Electric; he felt that investing overseas was the right thing to do.
Of course, investing in Hong Kong is also very important, but Hutchison Whampoa already holds 41.6% of HK Electric, which is not a small percentage of its shares.
"Could you explain the specific reasons?"
Chen Zerui nodded and said, "Hong Kong Electric's profits have been increasing year by year, and when the 1990s arrive, its project in Ap Lei Chau will inevitably generate even greater real estate profits. Therefore, our increased holdings will help us obtain higher dividends."
Ma Shimin nodded. The power plant in Ap Lei Chau has been relocated to Lamma Island, and the old site of the power plant will be developed into a large-scale real estate project, just like Whampoa Garden, which will continuously generate profits.
"Okay, we'll discuss the specific shareholding increase plan later. Remember to keep it confidential."
"Yes"
As CEO, Simon Murray patiently listened to the opinions of all his colleagues. Moreover, he was energetic, patient, and good-tempered, which earned him the respect of Hutchison Whampoa employees.
However, Chen Zerui's actions today also serve as a 'reminder' to the management of Hutchison Whampoa, indicating that the third generation of the Chen family has grown up and will begin the 'succession' process.
In fact, it is generally known in Hong Kong that although Chan Kwong-leung has been retired for seven or eight years, he is still alive and well, and therefore can still influence the Chan family's businesses. Secondly, the second generation of the Chan family is in their prime and manages the business very well, achieving great success, which is widely recognized.
In this way, the "development spirit" of the second generation of the Chen family was well recognized.
If the third generation can also be outstanding, then everyone will think that the Chen family is truly a 'legendary family'.
Before going to Canada, Ma Shimin came to Chen Wenjie's office and gave a work report.
Chen Wenjie said, "Acquiring Canterra Energy is a good expansion strategy. After this acquisition, Husky's financial situation may become even worse!"
Ma Shimin said confidently, "Mr. Chen, you don't need to worry. Oil is one of the most indispensable energy sources in the world, and a price increase is only a matter of time."
He was relatively optimistic, and Chen Wenjie knew this.
Chen Wenjie received a 'speculation' from his father: the oil market might be in a slump for at least another five years, and given Husky's current situation, he might not be able to manage his finances properly during that time.
Of course, the Chen family's investment in energy remains unwavering; they are simply continuing to increase their investment.
"I'm worried that our partners might give up halfway through!"
Upon hearing this, Ma Shimin said, "That's possible. Bob from Canadian Chemicals has expressed concern about this expansion more than once. Of course, if he wants to exit Husky, I think we should use Hutchison Whampoa's funds to buy his shares."
"That's exactly the effect I wanted," Chen Wenjie nodded and said, "At that time, Cheung Kong Holdings will also be able to share the pressure."
Upon hearing the name 'CK Asset Holdings', Simon Murray knew it was a formidable force.
This giant not only boasts a massive commercial real estate portfolio in Hong Kong, supplying approximately one-seventh of the city's residential properties, but more importantly, it has substantial commercial real estate investments in Singapore and Japan. Its Japanese real estate portfolio, in particular, is valued at tens of billions of Hong Kong dollars.
"it is good"
Although Simon Murray knew that Cheung Kong Holdings held some shares in Husky Energy, which would increase the Chan family's stake in Husky, he would not hesitate to do so.
Hutchison Whampoa remains Husky's largest shareholder, which is sufficient.
Afterwards, Ma Shimin reported on something: "After I finish dealing with the matters in Canada, I will fly to the United States to deal with the AsiaSat 1 issue. The US side still needs to continue lobbying."
Upon hearing this, Chen Wenjie immediately said, "Okay. The Asia Satellite issue is very important, and it's also important to our family!"
Ma Shimin asked suspiciously, "What does Mr. Chen mean?"
AsiaSat-1 is a Hong Kong-based commercial satellite company, with Hutchison Whampoa holding one-third of the shares, CITIC Hong Kong holding one-third, and a foreign shareholder in the remainder.
The story is complicated: In February 1984, Hughes Aircraft manufactured Western Union 6 for Western Union, which was launched into space by the Space Shuttle Challenger. The launch failed, and the satellite wandered in space.
After the launch failure, Lloyd's Insurance Company paid Western Union $75 million in insurance premiums, and ownership of the satellite was transferred to Lloyd's. Simon Smith was an employee of Lloyd's at the time. Lloyd's negotiated with NASA to recover the satellite. NASA received $275 million and successfully recovered Western Union 6 in November 1984. The recovery of the satellite from space was a miracle, and the process was documented for history. After successful recovery and repairs by Hughes Aircraft, Lloyd's sold Western Union 6 to Trey Satellite Corporation for $50 million. Trey later went bankrupt, and the satellite returned to Lloyd's ownership.
Finally, Hutchison Whampoa (with Simon Murray as CEO at the time) and the chairman of CITIC Group served as co-chairmen of Asia Satellite Company.
Subsequently, China, the United States, and French Guiana competed for the launch rights of "AsiaSat 1". China won the bid with a price that was only half of theirs.
Winning the bid is one thing, but whether the US government will allow the launch, whether the Coordinating Committee for Multilateral Export Controls (COCOM) will allow the launch, and how to ensure transportation are all things that require a lot of work.
Later, people only saw that the US and China were in a honeymoon period at this time, and Bush Sr. was also in a friendly dialogue, but there were still many other factors involved.
As co-chairman, Ma Shih-min is quite active in this regard and plays a significant role.
Chen Wenjie said, "After the satellite launch, the media group hopes to lease half of the C-band to establish a satellite television station. Of course, Hutchison Whampoa can hold shares and participate in the investment."
Ma Shimin suddenly realized that the Chen family also controlled more than half of Hong Kong's media industry, so they were naturally very enthusiastic about satellite television.
However, he stated, "Hutchison Whampoa must have invested at least over 40%."
Chen Wenjie said with a smile, "It's alright, we can discuss it later."
The Chan family didn't place much importance on the profits of this investment; the key was that it was "related to the dissemination of Hong Kong culture." Therefore, Chan Man-kit was instructed by his father to pay attention to this matter.
From the perspective of the president of Hutchison Whampoa, Simon Murray's ideas are not problematic and there is no conflict.
Shortly thereafter, Chen Wenjie also brought his second son, Chen Zeli, to Vancouver, Canada, to sign a contract for the development of the former site of the Vancouver World Expo.
Not long ago, Chen Wenjie, together with Cheng Yu-tung and Li Zhaoji, established Concord Company and won the bid for the entire site of the 1986 Vancouver Expo from the BC government for 320 million Canadian dollars. The site covers an area of about 200 acres, which is equivalent to three and a half times the size of Taikoo City.
This plot of land is located on the north bank of False Creek in downtown Vancouver, a prime location.
Before signing the contract, Chen Wenjie, along with his second son Chen Zeli, met with Cheng Yu-tung and Li Zhaoji at the Hilton Hotel in Vancouver. They were all old friends.
Chen Zeli greeted the two uncles: "Uncle Zheng, Uncle Li."
Chan Man-kit was born in 1933, four years younger than Lee Shau-kee and seven years younger than Cheng Yu-tung, making them contemporaries. Chan Kwong-leung, on the other hand, was already a tycoon in the Sheung Hoi Tan district in the 1920s and 30s, making him a senior to Cheng Yu-tung and Lee Shau-kee.
Cheng Yu-tung smiled like a Maitreya Buddha and said, "Ze Li will be taking on the main responsibility this time, but don't feel pressured. We believe you can definitely complete this project beautifully."
The entire project involved a huge investment, but Chen Wenjie appointed his second son, Chen Zeli, to be in charge of the project. Chen Zeli is only 24 years old this year and has three years of work experience.
Of course, 60% of the equity in this project belongs to the 'Chen Wenjie Father and Son Fund', 30% belongs to Cheng Yu-tung and Lee Shau-kee, and the remaining 10% belongs to the Canadian Imperial Bank of Commerce.
Chen Zeli immediately said seriously, "I can't say I can shoulder the burden alone. With my father and two uncles, who are real estate veterans, watching over me, and so many real estate professionals helping me, these conditions are very good. If I don't do well, it would be really unacceptable!"
Upon hearing this, Cheng Yu-tung and Lee Shau-kee sighed inwardly: "The third generation of the Chan family is so outstanding, while the second generation might not even be able to do so well! There are still differences between people."
Then, Chen Wenjie smiled and steered the conversation toward investing in Canada. He is quite familiar with Canadian business, as his father had arranged for him to become a partner with the Canadian Imperial Bank of Commerce as early as the 1970s, and now he regards Canada as a 'lucky place'.
Cheng Yu-tung and Lee Shau-kee also wanted to invest in Canada, so they naturally sought advice and exchanged views earnestly.
Soon, Concord signed a formal development contract with the government of British Columbia, Canada.
The terms of this contract, once revealed, sparked a great deal of discussion in the local area because they were simply too good to pass up.
The land development funding of CAD 3.2 million can be paid in installments over 15 years, with only CAD 2000 million paid annually, equivalent to USD 2500 million or HKD 2 million.
At this time, Hong Kong immigrants were flocking to Canada, creating a strong demand for local real estate. Moreover, this project brought together three of Hong Kong's most prestigious real estate families, making them highly reputable developers.
Of course, the BC government also pointed out that this move aims to attract more high-quality Hong Kong immigrants, which will greatly help the Canadian economy.
That's true. People who move from Hong Kong to overseas are at least middle class, and many of them bring their assets with them.
When Chen Wenjie returned to Hong Kong, he said to Chen Zeli, who remained in Canada, "See! There are still many problems with the development of this project. Do you know what the biggest problem is?"
Chen Zeli, speaking on “public opinion,” said without hesitation: “Although the Canadian government welcomes our investment, there are many local residents who oppose it, and these people will inevitably do outrageous things in the future.”
Chen Wenjie said with satisfaction, "So, you're confident now?"
"Yes, I will definitely make this project a success!"
Okay, I believe you.
The specific development of this project has already been outlined in a 'plan,' and the entire site development is a long-term endeavor. Initially, some apartments and supporting commercial facilities will be developed, but a large amount of land will remain, which will be used to wait for its value to appreciate before further development is considered.
The best strategy is to build while simultaneously protecting the environment.
On the plane back, Chen Wenjie was in a rare good mood.
He was groomed by his father to be the successor of the "Cheung Kong Group" from a young age. He felt great pressure from the 1970s onwards, and the pressure increased rather than decreased when he officially took over in the 1980s.
Today, he remains diligent and hardworking, but faces new pressure – the issue of succession by the third generation.
Although his father, Chen Guangliang, is still in good health and can work until he is seventy or eighty, Chen Wenjie knows that cultivating a successor is a long-term process.
He started working at 21 and officially took over the business at 47. His father had been carefully guiding him for the past 26 years.
His eldest son, Chen Zerui, has been working for eight years and has begun to serve as a senior executive at Hutchison Whampoa; his eldest daughter, Chen Siqi, is 27 years old this year and serves as a legal advisor for the family office and Cheung Kong Holdings; his second son, Chen Zeli, is now taking on a major responsibility for a large-scale real estate project; and his youngest son, Chen Zejing, is only a senior in college but has decided to continue pursuing a master's degree.
The final leader of the four siblings is still undecided. Although Chen Zerui is the "crown prince," it cannot be ruled out that the other three will take over as the future leaders of the Cheung Kong Group, including their daughter Chen Siqi, who is very capable.
On the other hand, in addition to packaging the Cheung Kong Holdings' shares into a "Chen Wenjie Father and Son Trust" and ensuring that the family would never be separated again, Chen Wenjie's lineage also has a "Chen Wenjie Father and Son Investment Fund" that uses Cheung Kong Holdings' dividends to engage in personal investment in real estate, such as the Vancouver World Expo project in Canada, as well as two Hilton hotels in Canada, and office buildings in Manhattan, etc.
Chen Wenjie's current plan is for his eldest son, Chen Zerui, to continue accumulating experience in 'comprehensive business' at Hutchison Whampoa. Chen Zerui previously learned through real estate projects, and will later return to the group as a deputy general manager to prepare for succession.
The eldest daughter, Chen Siqi, is deeply loved by her grandfather, so she participates in some affairs of the family office. Even after she gets married in the future, she can participate in important family matters as a legal advisor, which is something that her sisters have not been able to do. Of course, the main reason is that the eldest daughter, Chen Siqi, has a master's degree in law and is proficient in the legal system of Europe and the United States.
If the second son, Chen Zeli, does well in this real estate project in Vancouver, he can return to the group to participate in the real estate business in the future.
As for the youngest son, Chen Zejing, he is a top student in finance, but he will still join Cheung Kong Holdings in the future and participate in investment work.
All four of his children are in business; after all, he is the eldest son and should rightfully follow in his footsteps. (End of Chapter)