Monday, May 28, 2012

Superdaddy Dearest

       Li Ka-shing with first son Victor                           Second son Richard

Well, it was bound to happen – Superman is planning retirement. The man being referenced is not a buff-looking dude who wears a leotard, cape and tighty-whitey undies dyed red. It is Li Ka-shing – Asia’s richest man. (Caveat: It’s possible that he may actually dress that way in private, but he has never been publicly caught in the act.) And it’s possible that the business world will be a slightly less-safe place without him in it.

His succession plan features his two sons – Victor and Richard. No surprises there. First-son Victor will get his father’s shares in both Hutchison Whampoa (the industrial conglomerate) and Cheung Kong (the real estate vehicle). Also no surprises there. Victor has been a steady if unspectacular presence in those two listed companies as his father’s lieutenant for many years. It remains to be seen whether he can continue to build the value in the businesses (some would characterize them as a reign of terror over Hong Kong, such are their grips on the city’s commercial activities) that his father achieved, or whether Victor will founder due to a lack of vision, gravitas and/or organization skills.

Second-son Richard is and has always been a more interesting case. Befitting his place in the offspring order, he has been the typically more independent, rebellious sort. Two major hits during the first dot-com era helped him make his own mark on the Asian business world. First was the $950 million sale of the StarTV satellite TV network to Rupert Murdoch in 1995, a deal which netted him a tidy profit on a $125 million investment. No doubt Dad was proud of that trade. He leveraged that cash into his internet holding company - Pacific Century Cyberworks – that took over the staid Hong Kong Telecom in 2000 in a deal that became known as Asia’s version of AOL TimeWarner. The resulting company, PCCW, is still Hong Kong’s leading telecom provider. With the completion of this second deal, Richard resigned his directorship Hutchison Whampoa, also in 2000, since Hutchison was keen on building out a rival mobile network - 3.

Since then, Richard has seemed to spend much of his energy scheming to squeeze out more control in PCCW from minority shareholders, building out the dubiously conceived Cyberport development, giving birth to children out of wedlock as one of Hong Kong’s most eligible bachelors, and generally keeping himself visible in the local news media. Despite the attention that he has garnered since 2000 stepping out from the caped shadows of his father – and even competing against him in several occasions, Richard has struggled to replicate the success that he demonstrated in the previous decade. Shareholder value creation at PCCW has been lackluster. Oh, and he had to correct a public statement that he had received a degree at Stanford University. (Not.)

Nevertheless, succession time is a time to come together as a family and make a public stand. Superdad has said that he will support Richard’s investment activities through the provision of cash in an amount that is “multiple times” the son’s current assets. Niiiiiice. Dad says he is confident that the money will be invested into “traditional long-term” industries that somehow will not conflict with older brother Victor’s interests. It is Dad’s way of saying “Second Son, go forth and multiple” as well as “Don’t screw up by investing into hair-brained schemes that piss off the family.” Time will tell whether Richard takes heed or invests into projects that do little more than produce familial kryptonite.

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