Hong Kong's richest man, Li Ka-shing, is nicknamed Superman for his investing prowess. But the 91-year-old may finally have found his kryptonite in contending with Beijing.
This week, his CK Asset Holdings (CHKGF) conglomerate has inked a US$3.3 billion deal to buy the British pub chain Greene King (GKNGY) , which has 2,700 pubs, restaurants and hotels in Britain. It's the latest in a string of buyouts that Li has struck in the United Kingdom.
Li has faced allegations of disloyalty to China over the last few years. "Editorials" in state-controlled newspapers were particularly aggressive in 2015, criticizing him for selling assets in China, and selling the country out in the process.
That was shortly after he struck his biggest-ever international purchase, worth US$14.2 billion, to buy the British cell-phone operator O2, to go along with the network Three UK (normally styled just as 3 in its branding) that he already owns.
The O2 deal was blocked in 2016 by the European Commission, which viewed the combination of the two mobile networks under one control as anti-competitive. But it would have outdone Li's US$9.1 billion purchase of the electricity utility U.K. Power Networks as his biggest foreign purchase.
Now, with Greene King, he is back sniffing out bargains in Britain. Europe accounts for 55% of the earnings of sister conglomerate CK Hutchison Holdings for the first half of 2019, and Britain alone 22% of first-half profits.
Is Li, who was born in the famously hard-working and business-savvy town of Chiuchow (now Chaozhou), betraying his homeland?
Personally, I believe he is making the most of the Brexit chaos, and redeploying assets in Hong Kong that are effectively in U.S. dollars (since the Hong Kong and U.S. dollars are pegged) into the extremely weak British pound. He is a consummate opportunist, and dealmaker.
The British pound has traded above HK$16 to the Hong Kong dollar since I've lived in Hong Kong. Having touched that point in 2007, it is now below HK$10, at HK$9.57 at last count. So you get an incredible discount on British assets if buying in HK$, or indeed US$.
Consider that had Li struck the deal for O2 now, at the rate of today's British pound, it would have cost US$12.5 billion rather than US$14.2 billion. The purchase of U.K. Power Networks would have cost US$7.1 billion, not US$9.1 billion. That's 12% off the 2015 deal, and a whopping 22% off the deal in 2010.
Li has officially "retired." As of last year, he is now "senior advisor" to CK Asset Holdings and CK Hutchison Holdings. Elder son Victor is now chairman of both. But the famously controlling father will be providing plenty of "advice" ...
He in 2012 identified Victor to take over his public companies, a son who is dutiful but rather conservative and less-charismatic. I profiled Victor here for Reuters in a heavily reported piece (the Li family rarely speaks to the media). "Superman" allocated his private enterprises to the more-entrepreneurial younger son, Richard Li, who has clashed with his dad - partly because they have similar wheeler-dealer personalities.
Li Ka-shing is worth an estimated US$27.7 billion, good for No. 28 among the world's richest, according to Forbes. Although he is a charismatic man to meet across the deal table, he is not much of a politician. Most recently, Li has struggled with how to respond to the pro-democracy demonstrations in Hong Kong.
Like most tycoons, Li has been silent among the tumult in Hong Kong this summer. But a week ago, he took out two separate front-page advertisements in several of the city's biggest newspapers. One placed a Stop sign across the Chinese characters for violence, and warned that "The best intentions can bring the worst results." It spoke of six loves: "Love China, Love Hong Kong, Love Oneself; Love Freedom, Love Empathy, Love the Rule of Law."
The other was even more cryptic. It quotes a line from a poem dating to the Tang Dynasty, which on its surface means something like "Picking too many melons makes the vine wither." In context, it's about a son who asks his mother not to harm her sons for political gain.
I'm not too sure why Li felt the need to take out the ads. The line from the poem was a repeat of something Li said in reference to a previous election for Hong Kong's leader, and seems to suggest that Hong Kong should be left free to govern itself without too much interference.
There's a theory on social media, explained in detail here by NPR, that if you read only the last character of each phrase in one ad, it forms a sentence "Allow Hong Kong to police itself, the cause and result depend on China." It seems a stretch to me.
On the surface, the advertisements walk a very careful line that avoids expressing support for the administration, Beijing or the demonstrators. Li later issued a statement to accompany the ads, quoting the English idiom that "The road to Hell is often paved with good intentions," and that we must "be mindful of unintended consequences."
Hong Kong's tycoons used to be lauded in China when it was emerging from the Cultural Revolution. Li made a fortune buying property in Hong Kong around the time of Cultural Revolution in China, and particularly the 1967 pro-Communist riots in Hong Kong.
Those riots are interesting to compare to today's pro-democracy demonstrations. In 1967, 51 people died, including one anti-Leftist radio host who was burnt alive in his car by a death squad, and two children who died picking up a bomb dressed as a present. The police defused some 8,000 bombs, of which 1,100 were live.
So the 2019 demonstrations, which Beijing has attempted to portray as wildly violent riots by U.S.-directed separatist traitors, are incredibly mild by comparison. There have been suicides by demonstrators; the most serious injuries have been caused by the police firing tear gas and bean bag rounds at protesters who do little more than push and shove. (Beijing has attempted to ramp this up by planting its agents among the demonstrators, to push them to act more violently).
Hong Kong's tycoons have fallen in the eyes of mainland China's rulers and citizens. China no longer needs their capital; China's increased nationalism prefers "home-made" cybertycoons like Alibaba Group Holdings (BABA) co-founder Jack Ma. Ma toes the Communist Party line socially, restricting his comments to business matters.
The Global Times back in 2015 criticized Li not only for selling out of China but also for responding to his critics for carrying out a "Cultural Revolution-style" character assassination on him. Li needs to undergo a "de-deification" process, the paper said.
The editorial, surely setting out the official party line, said that "Mainlanders now tend to see Li as a profit-driven businessman, rather than as a role model who loves the country and Hong Kong."
I do believe that high-profile businesspeople in Hong Kong feel real pain over the situation that the city currently finds itself in. Li may just have felt he had to say something about the situation with his ads.
Meantime, though, he is smart enough to see that Britain's political chaos makes for a buying opportunity now. Hence the Greene King pub deal.
Should Hong Kong's economy, property and stock market enter the tailspin that the government warms will come if the protests continue, I'm sure Li will be back and buying at cents on the dollar in Hong Kong once again.