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HSBC's key role in Li Ka-shing's UK market investments

  • Staff Reporter
  • 2014-04-17
  • 09:04 (GMT+8)
Li Ka-shing at an event to announce the company's annual results, Feb. 28, 2013. (File photo/CNS)

Li Ka-shing at an event to announce the company's annual results, Feb. 28, 2013. (File photo/CNS)

Hong Kong property tycoon Li Ka-shing and his family have sold their assets in mainland China and Hong Kong and increased their investment in European countries, particularly in the United Kingdom, which can be attributed to Li's close relations with HSBC Bank.

The family's seventh sale of its assets in mainland China and Hong Kong since August 2013 took place on April 8 and was executed by Li's second son Richard Li, who sold the Pacific Century Place Center in Beijing to Vinter Star Limited for HK$7.1 billion (US$928 million).

Although Li Ka-shing stated that he is not abandoning the mainland or Hong Kong, the financial reports of his Hutchison Whampoa seem to indicate the opposite.

In 2013, Hutchison Whampoa's operational profits in Europe exceeded combined profits in Hong Kong and mainland China for the first time, according to the Guangzhou-based 21st Century Business Herald, reflecting the company's efforts to expand its European business by acquiring assets in Europe.

Hutchison Whampoa reported HK$24 billion (US$3.1 billion) in earnings before interest and taxes in Europe, making up 37% of the company's total revenue, whereas its EBIT in the Hong Kong and mainland China markets accounted for 35% of the total at HK$22.69 billion (US$2.92 billion).

Among Li's investments in Europe, Li Ka-shing places greater focus on the United Kingdom.

Li Ka-shing said that he was focusing on the UK because of the country's ideal investment environment and good legal system, but sources said that it could also be because of the close connections between Li Ka-shing and HSBC Bank.

On May 15, 1985, Li Ka-shing was invited by the then-chairman of HSBC Michael Sandberg to serve as the deputy chairman of the bank, allowing the Hong Kong business tycoon to become an official part of a British-invested firm.

Sandberg was also crucial in helping Li Ka-shing assume control of his current flagship company Hutchison Whampoa.

Sandberg joined HSBC Hong Kong in 1949 and was promoted to the bank's general manager in 1971. During the same year, Li Ka-shing established Cheung Kong Holdings, focusing on the real-estate business.

Hutchison Whampoa is made up of two separate companies-Hong Kong and Whampoa Dock and Hutchison International.

HSBC, which was chaired by Sandberg at the time, had saved Hutchison International with HK$150 million (US$19.3 million) in 1975 when Hutchison International was undergoing a financial crisis.

In 1977, Hutchison acquired all of Hong Kong and Whampoa Dock, creating Hutchison Whampoa Limited, of which the bank became a major shareholder.

On Sept. 25 1979, Li Ka-shing announced that Cheung Kong was buying HSBC'S 22.4% stake in Hutchison Whampoa and that Sandberg had agreed to let Li Ka-shing pay 20% of the payment in cash and the remainder in installments.

Li acquired a 39.6% stake in Hutchison Whampoa in November 1980 and successfully began chairing the company.

A former chairperson of Hutchison Whampoa stated that Li Ka-shing was able to buy Hutchison Whampoa because of Sandberg.

Since 2010, the Li family has sold assets worth HK$186.8 billion (US$24.1 billion) located in mainland China and Hong Kong through 11 deals, with 96.8% of the capital from the sale being used to invest in Europe.

References:

Li Ka-shing 李嘉誠

Richard Li 李澤楷

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