Several weeks after putting a succession plan in place, Li Ka-shing, who turned 84 in June, might have been expected to perform his swansong. Not a bit of it.
At a press conference in Hong Kong to discuss his companies’ half-year results last week, he made it clear he would not be contemplating retirement. “I am still the big shareholder. Hutchison and Cheung Kong will be [eldest son] Victor’s one day,” said one of the world’s richest men, with a net worth of $25.5-billion (U.S.), before adding emphatically: “I haven’t retired.”
In fact, if the past couple of weeks are any indication, another chapter in the long story of Mr. Li’s career is about to be written. Already one of the biggest foreign investors in the U.K., Mr. Li’s flagship, Hutchison Whampoa, has cash and cash equivalents of $12-billion as of June 30.
Having acquired UK Power Networks in 2010 for $9.1-billion and Northumbrian Waterfor $4-billion last year, Mr. Li’s companies bought Wales and West Utilities in late July.
His companies now provide millions of Britons with everything from gas – Mr. Li’s companies have a market share of about 25 per cent in the U.K. – to electricity, sewage and water services.
An old joke in Hong Kong is that of every $10 a citizen spends, $1 goes to Mr. Li. Although he is unlikely to become so dominant in the U.K., Mr. Li already owns the large British port of Felixstowe, mobile phone company Three and health and beauty retailer Superdrug, in addition to his various utilities holdings. He is also one of the bidders for the Manchester airport group. “The U.K. has become another Hong Kong for the group,” says Cusson Leung, an analyst at Credit Suisse.
To understand why someone who constantly professes his love for China – he did so a couple of times at his recent results briefing – invests so heavily in U.K. infrastructure, one needs to understand Mr. Li. He is a value investor who believes Europe’s troubles have created good buying opportunities. As a Hong Kong tycoon who rose from rags to riches in the former British colony, he is also attracted to common law jurisdictions and the stable regulatory environment of utilities in the U.K.
Mr. Li arrived in Hong Kong as a refugee during the Sino-Japanese war at the age of 12. His father died of tuberculosis, leaving the teenage Mr Li to take care of his family. The tragedy “branded on my heart forever the questions that still drive me,” Mr Li told Forbes magazine earlier this year. “Is it possible to reshape one’s destiny? … And is it possible to enhance chances for success through meticulous planning?”
He has done both in equal measure. He opened a plastic flowers factory in 1950, then bought up lots of Hong Kong property when anti-British riots in 1967 sent prices plummeting. Property development has been a constant investment theme since, and even on Friday, Cheung Kong won a $1.2-billion bid to build a residential and commercial complex on the island – the highest amount paid for a site in Hong Kong for more than a year.
Mr. Li shot to prominence when Hong Kong and Shanghai Bank sold him a controlling share in Hutchison, one of the city’s largest conglomerates, in 1979. The takeover was referred to as the first handover of Hong Kong because it marked the first time a Chinese tycoon had achieved such stature – the former British colony was returned to Chinese sovereignty in 1997.
Hong Kong may be where the company’s headquarters are, but Europe accounted for just under a third of Hutchison’s earnings before interest and taxes of HK$26-billion ($3.3-billion U.S.) for the half-year ended June – with the U.K. accounting for 22 per cent of the total global earnings before interest and tax. Mainland China, by contrast, accounted for 22 per cent of EBIT. Canning Fok, managing director of Hutchison, says: “[Our investments] depend on where the opportunities are. Today, the best opportunities are in Europe.”
This contrarian view is vintage Mr. Fok, who has been Mr. Li’s point man through the ups and downs of the company’s early investment in 3G phone services, which took more than eight years to turn an operating profit. Mr. Li’s companies have been raising cheap, long-term capital over the past few months. To pick just a couple of examples: in January and February Hutchison issued a total of $2.5-billion of five and 10-year bonds. In June the company was at it again, this time in euros, issuing a total of €2.25-billion.
Along the way, the company has repaid loans that would have fallen due in 2013. Frank Sixt, the company’s chief financial officer, jokes that the company need not borrow another penny from a bank through 2013, 2014 and much of 2015. “We’re not taking a chance that significant maturities will come due at a difficult financial time,” Mr. Sixt says. According to the company, net debt to total capital is now 22.8 per cent, down from 31 per cent in June 2010.
When he bought Hutchison in 1979, the Financial Times observed that Mr. Li had become “the most talked about businessman in a town where most of the talk is about business.” Mr. Li is unlikely to reach the same celebrity status in the U.K. that he enjoys in Hong Kong. At the results briefing on Aug. 2, a staccato burst of cameras clicking greeted his lifting a glass of tea or even raising his hand.
But Mr. Li’s decision to spend billions buying businesses such as water, electricity and mobile communications that offer a stable return in these uncertain times promises to be an interesting postscript to Britain’s acquisition of Hong Kong in the 19th century.