Asia’s Richest Man Relocates Companies From Hong Kong

By Li Zhen
Li Zhen
Li Zhen
January 18, 2015 Updated: January 19, 2015

HONG KONG—Hong Kong tycoon Li Ka-shing, the richest man in Asia, announced recently that he plans to merge his two main listed blue-chip companies, Cheung Kong Holdings Limited and Hutchison Whampoa Limited, and to set up two new companies in their place.

The new companies, CKH Holdings and CK Property Holdings, will change their base of incorporation from Hong Kong to the Cayman Islands. Some analysts believe the plan shows that Li has a bearish outlook on Hong Kong’s economy, which has raised concern that there will be more divestment in Hong Kong.

At a press conference in March last year, Li insisted that he would not take divestment action in Hong Kong. Less than one year later, he announced his decision to relocate.

There has been speculation that Li made the decision because of Hong Kong’s political situation. Li announced the plan shortly after the Hong Kong government issued a distorted report on public sentiment and a document that denied Hong Kong people the universal suffrage they have been protesting for.

Li attended a press conference on Jan. 9 to explain the business restructure. His eldest son, Victor Li Tzar-kuoi, group managing director Fok Kin-ning, and several other executives accompanied him there.

Cheung Kong and Hutchison will cancel their listing status. Of the two new companies Li will set up, CKH Holdings will hold all the non-property businesses while CK Property Holdings will hold the property businesses of the two former companies.

Li Ka-shing, currently the chairman of Cheung Kong, will be the chairman of CKH Holdings and CK Property Holdings. His son Victor Li will continue to be the vice-chairman and managing director of the two companies.

Cheung Kong shareholders will receive 1 CKH Holdings share per 1 Cheung Kong share, and Hutchison shareholders will receive 0.684 CKH Holdings share per 1 Hutchison share.

After the implementation of the plan, the listing of CKH Holdings will be done by introduction, and the trading unit will be 500 shares. The current stock code (00001) for Cheung Kong will be used for future stock trading.

Li hopes to distribute more dividends in 2015. He said the combination and reorganization will pave a better future for the company by eliminating the holding company discount of Cheung Kong’s stake in Hutchison, so more shareholder value will be created.

“In summary, it definitely will be good. You can just trust me on this,” Li said.

Political Reasons?

Li has repeatedly denied that he is divesting in Hong Kong, saying the restructure is meant to balance the business risk.

He said that over the past few years, more than 75 percent of Hong Kong and mainland Chinese companies have registered in the Cayman Islands, mainly due to its flexible company law. This is purely a technical issue, not a business group relocation, Li said.

Victor Li said that re-listing would make it possible to move the controlling rights of Husky Energy to the Hong Kong Company. When asked whether the relocation was related to the change in the investment environment in Hong Kong, Victor Li said he didn’t put much thought into that when doing business.

The Umbrella Movement in Hong Kong, a 75-day protest for democracy and universal suffrage, took place last year when Hongkongers were fed up with Beijing controlling their elections.

When asked about the economic impact of the Umbrella Movement on Hong Kong, Li said that it might cause some loss for Hong Kong retail businesses, but has little impact on Cheung Kong and Hutchison.

Li said that Cheung Kong operates in 52 countries and regions with 280,000 employees, and the Umbrella Movement would not affect the company’s established policy. He smiled and told reporters: “Write positively.”

Li’s recent massive asset sales in Hong Kong and mainland China have been viewed as a signal of his dissatisfaction with Hong Kong Chief Executive Leung Chun-ying.

Li did not vote for Leung in the 2012 Chief Executive election. After Leung took office, he implemented pro-communist policies in Hong Kong, angering many Hongkongers.

Since 2013, Li has sold large assets in Hong Kong and mainland China, shifting the investments to Europe and other places.

During the press conference, Li was repeatedly asked to comment on the re-election of Leung. At first he refused to answer, but later he said: “You know better than me.”

Lack of Confidence

Hong Kong economist Kwan Cheuk-chiu believes that Hong Kong is in political turmoil, and the relocation of the Li family’s business shows a lack of confidence in Hong Kong. He worries that other business tycoons will follow.

“He seems to have bearish confidence in the future of Hong Kong. It is not an issue of divestment or not, he just wants to withdraw,” Kwan said.

As for the timing of divestment, Kwan suspects it is related to the recent political climate and indicates his frustration over the chaos caused by political reform in Hong Kong.

He seems to have bearish confidence in the future of Hong Kong. It is not an issue of divestment or not, he just wants to withdraw.
— Kwan Cheuk-chiu, Hong Kong economist

Senior lecturer Lee Siu-po from the Chinese University of Hong Kong commented that the increased political risk in Hong Kong in recent years makes it understandable that such a huge business empire would want to avoid the risk.

Li announced the new restructure soon after Hong Kong’s government issued a second round of the political reform consultation paper that infuriated Hongkongers and sparked the Umbrella Movement. However, Li said during the press conference that if the political reform was not passed, Hong Kong would be worse off.

Some analysts indicate that the current political situation in Hong Kong is closely related to the fight between the Xi Jinping faction and the Jiang Zemin faction of the Chinese Communist Party. The analysts think Li does not want to be involved in Beijing’s fight, has lost confidence in the CCP, and hopes to protect his business through relocation.

Translated by Susan Wang. Written in English by Sally Appert.

Li Zhen