NBA China, valued at about US$2.3 billion, is being run by former Microsoft executive Tim Chen, who was appointed last September. It will be governed by a board of directors that will include representatives from the investors, as well as current NBA team owners and league officials.

NBA China will have the right to create teams in the country, and own all broadcasting and merchandising rights.

'The opportunity for basketball and the NBA in China is simply extraordinary,' NBA commissioner David Stern said in the release.

'The expertise, resources and shared vision of these immensely successful companies will help us to achieve the potential we see in the region.'

The NBA's popularity has grown in China with the success of Yao Ming, the NBA's top draft pick in 2002. The Chinese sports ministry says basketball is played by 300 million people in the country and is the most popular sport among youths.

The NBA has 16 marketing partnerships with China-based corporations and US-based companies doing business in China. It opened an office in Hong Kong in 1992 and employs 100 people in four offices in China.

Hutchison, a conglomerate controlled by the Hong Kong billionaire Li Ka-Shing, increased size of the sale - already the largest ever global debt deal in Asia excluding Japan - from $3 billion, said the people, who requested anonymity. It would be the largest-ever corporate bond offering by an Asian company outside of Japan.

Hutchison has spent about $14 billion on high-speed mobile phone networks since 2000. It intends to use the proceeds to refinance debt. The company has about $2.9 billion of debt coming due in 2004, according to Bloomberg data.

Hutchison has divided the dollar-denominated offering into three portions with maturities of seven, 10 and 30 years. Investors are being offered a higher yield than companies with similar credit ratings to compensate investors for the risks of its so-called third-generation, or 3G, cellular business.

"Hutchison's investments in 3G introduce higher risks, which means they need to pay more," said John Teng, a fixed income analyst at Nomura International (Hong Kong). "There's a chance of a credit downgrade because of their exposure to 3G.

Hutchison has already borrowed about $4.5 billion from investors this year in four separate global offerings.

"They need to borrow to be able to do acquisitions and build the business," said Kunalan Sivapuniam, a fund manager at Chinkara Capital in Singapore

Hutchison said in bond-sale documents that there were no assurances that it would be able to fulfill its plans for 3G phone services, or that competition from lower-priced alternatives would not supercede 3G technology. 

Hutchison's 3G businesss had a 3.9 billion Hong Kong dollar, or $500 million, first-half loss, limiting the company's overall profit growth to 2 percent. Hutchison's credit rating was cut to A-minus in June by Standard Poor's because of the financing requirements

The willingness of investors to lend money to Hutchison stems in part from its other businesses, which span ports, retailing, real estate and oil. The group controls 14 percent of the world's container trade, three-quarters of Europe's biggest port operator and is China's largest foreign container operator.

"The fears over 3G are a bit overblown," said Desmond Soon, a fund manager at Pacific Asset Management. "The rest of the business - the cash cow - is stable."

The banks are testing investor demand for about $1.5 billion of Hutchison bonds maturing in as long as 30 years, bankers involved said Monday. The ports and telecommunications company controlled by the Hong Kong billionaire Li Ka-shing has already sold $4.5 billion of bonds overseas this year, hiring one bank to manage each of the four offerings.

HSBC managed two of those sales, giving it top slot so far this year with $3.3 billion of global debt sales for companies in Asia excluding Japan, according to Bloomberg data. Merrill Lynch handled one and is currently in second place with $2.5 billion worth of bond deals, and Goldman managed one and is fifth with $1.4 billion of bond sales. Top rankings help banks win business.

"Banks will be aggressively pursuing this opportunity to improve their league table position," said Frits Jan Algera, a debt banker at ABN AMRO Holdings in Hong Kong.

"It's a good time for Hutchison to sell bonds as rates are relatively low and demand for its credit is high."

A higher league table ranking may give a bank an edge when bidding to manage planned sales by the governments of Malaysia, Indonesia and the Philippines, as well as such companies as Korea Electric Power, Korea Gas and Pertamina, Indonesia's state oil company.

Bankers at the firms that are heading the league tables declined to comment. Laura Cheung, a Hutchison spokeswoman, also declined to comment.

Hutchison may be tempted into a fifth bond sale because it needs to fund new phone services and has $2.8 billion of debt maturing next year.

Goldman bought the securities in advance, shouldering the risk that they would decline before investors bought them, bond-sale documents show. It did not collect an underwriting fee, according to the documents.

Two months ago, Merrill Lynch Co. earned $29 million for arranging a $1.5 billion bond sale by the Hong Kong communications and property conglomerate controlled by the billionaire Li Ka-shing.

Hutchison's bond sale "is a loss leader" for Goldman, said Henry Lee, founder of the investment firm Hendale Group, which manages $100 million. "They were snubbed by Li in February and needed to do something to get back into the frame."

Hutchison, whose businesses range from ports to European mobile-phone networks, has been a Goldman client for a decade. Li's companies have paid about $250 million in fees in the past five years, bankers said. Hutchison has accounted for more than a third of the $6.8 billion worth of global bonds sold by Asian companies outside Japan so far this year, Bloomberg data show.

Arranging the Hutchison bond sale made Goldman the second-ranked manager of global debt offerings in Asia outside Japan this year, up from 16th in 2002, according to figures compiled by Bloomberg. Merrill Lynch is ranked number one.

Michael Carr, Goldman's head of Asian investment banking, was not available to comment Wednesday. Spokespeople for the bank declined to comment.

In two previous bond sales, Hutchison paid 0.45 percent of the total proceeds in fees. Goldman's sale was a reopening of an earlier issue of 10-year securities arranged by Merrill Lynch. Fees on such secondary transactions are typically lower because the legal, promotional and administrative work has already been done.

Hutchison Whampoa managing director Canning Fok Kin-ning continues his reign as the city's highest paid executive at a public company, taking home a total of HK$130.94 million - of which HK$119 million was a bonus - in 2006.

His boss, Li Ka-shing, continued with tradition and took home a token director's fee, but earned dividends of close to HK$2.2 billion from his property flagship Cheung Kong (Holdings) in 2006.

Although Mr Fok's total payout was slightly lower than that of 2005, it reflects the general mood of the financial services sector, where salaries have been among the best ever over the past 12 months.

Hong Kong's high roller
Canning Fok is still adamant that his massive bet on 3G telecoms services will pay off

2005 January 6  from the print edition
In a  city with a passion for gambling, it is fitting that the biggest bet in Hong Kong's recent history has been laid by its top company: Hutchison Whampoa has staked $22 billion on the global success of third generation (3G) mobile-phone services.

Though Hutchison is controlled by Li Ka-shing, Asia's richest man, and his son Victor is deputy chairman, the investment in 3G, which (among other things) enables users to download music and make video calls on their phones, has become associated with Canning Fok, the group's managing director for the past 12 years and a long-time aide-de-camp of Mr Li senior. Given the huge cost of buying licences and building infrastructure, start-up losses and early setbacks—clunky handsets, patchy coverage and slow data downloads—it is not surprising that the 3G adventure unsettled investors. Eighteen months ago it strained the finances of Hutchison, a ports-to-property-to-retailing conglomerate with nearly $19 billion in revenues and almost $2 billion in net profits in 2003, and even threatened Mr Fok's job.

Today, the rotund 53-year-old with a trademark pudding-bowl haircut has regained his boyish grin. Subscriber numbers in Britain, Italy and several smaller countries—which failed to hit his predicted 1m by the end of 2003—soared to almost 6m in December 2004, well above forecasts. “Demand is tremendous,” boasts Mr Fok. He demonstrates new, improved 3G handsets with childlike enthusiasm. “This LG model is selling like hotcakes,” he says, calling up the latest soccer scores and a live video clip of Hong Kong's traffic jams while dismissing this reporter's PDA-phone: “I don't believe in handheld computers.”

Mr Fok spends 60% of his time on 3G, checks updated subscriber figures every two hours until his bedtime at 2am and accuses the media of being too “emotional” about the issue. But he feels good about the decision to plough the nearly $20 billion windfall Hutchison made from selling Orange, its 2G telecoms operator, to Germany's Mannesmann (it was later sold on to France Telecom) in 1999 at the peak of the telecoms boom, straight back into 3G—which he says will make its first operating profit in 2006.

Many industry experts remain sceptical. Hutchison is courting subscribers by subsidising handsets, even giving away some phones, as well as offering free minutes, free text messaging and low-margin pre-paid plans. “It is easy to get carried away with the subscriber numbers. We are concerned that Hutchison won't make an economic return in this decade,” says Chris Alliott, an analyst at Nomura, an investment bank.

And as the cost of acquiring a 3G customer rises (to €270 in November from €252 in July) Hutchison's annual average revenue per user is falling—from €51.5 to €44.5 in the same period. Another analyst says that subscribers mainly want Hutchison's 3G service because it offers the cheapest voice telephony, not for its lucrative data downloads, and that average revenue figures are misleadingly reported “gross”, before discounts. One Hong Kong tycoon, a friend of Mr Fok, is unconvinced: “3G is a gamble that I don't think will work. Who really wants video conferencing? Think how disastrous it could be for Hong Kong men if their wives call when they are with their mistresses. And I don't want business partners seeing who else I am doing deals with.”

Hutchison has been discounting so aggressively to capitalise on its early launch by locking in customers. But since November it has faced increased competition in Europe from Vodafone, the world's leading wireless provider, and two of the other five mobile operators in Hong Kong—SmarTone and CSL—launched 3G in December. Partly as a result, Cusson Leung, an analyst at Merrill Lynch, expects Hutchison's 3G operations to make an operating loss of $1.3 billion in 2006—when Mr Fok expects to be in the black—plus almost $1 billion in associated interest costs.

Even though Hutchison would be big enough to shoulder such a burden, it is hard to shake the impression that its obsession with 3G has distorted management priorities. Analysts accuse the group of selling some of its best assets, such as its stake in Procter & Gamble's Chinese consumer goods operation, to produce exceptional gains and so compensate for 3G losses—something Mr Fok denies. The group's stake in Canada's Husky Oil, highly profitable at current prices, may be on the block next, reinforcing Hutchison's reputation as an asset trader rather than a builder of businesses. Mr Fok bristles at that description.

In response to such criticisms, Hutchison has tweaked its strategy, floating minority stakes in various businesses to raise money while retaining control. For instance, most of its smaller telecoms operations, grouped as HTIL, now have a minority stake listed in Hong Kong. In December, Mr Fok talked about an early flotation of its Italian 3G business. Hutchison claims that such financial engineering reveals to investors the hidden value it has created. But the fact that its shares trade at just 1.2 times net asset value and at a discount to the Hong Kong market average suggests that the conglomerate pays a price for its complexity.

An arguably even bigger criticism relates to the opportunity costs associated with 3G. With China on its doorstep and Mr Li's excellent connections there, Hutchison could surely have invested its Orange windfall more profitably on the mainland, where it already has property, infrastructure and retailing interests. Mr Fok says it is expanding as fast as it can in China. But that is probably true only of ports. Though it is growing in retailing, for instance, Hutchison still owns only 27 supermarkets and 100 drug stores on the mainland, compared with 3,500 stores in Europe. In property and in building materials, other Hong Kong investors, such as Vincent Lo's Shui On group, have pulled ahead. Hutchison's bet on 3G is not the disaster it threatened to become a year ago. But Mr Fok surely has more long nights ahead. - 2005 January 6      THE ECONOMIST

Fok tops Hutchison wage list at $343,150 per day
Hutchison Whampoa group managing director Canning Fok Kin-ning, long reputed to be Hong Kong's highest-paid executive, made $343,150 every day last year - a fact revealed yesterday when the Li Ka-shing-controlled conglomerate became one of the first blue-chip companies to list directors' pay by name.

The company's annual report, released online yesterday, shows Mr Fok made $125.28 million last year. His boss, Cheung Kong and Hutchison chairman Mr Li, made $60,000 for the whole year - all from director's fees.

Mr Li is understood to make a lot more money from his share-trading activities.

Hong Kong's median monthly wage is $9,500.

Mr Fok's pay package, which included a $113.5 million bonus on top of a salary of $9.77 million, accounted for 48.2 per cent of the money Hutchison spent on its directors.

Mr Li's eldest son, Victor Li Tzar-kuoi, had a higher salary as managing director of Cheung Kong - $27.62 million - but trailed badly in the bonus stakes, picking up $30.52 million from Hutchison and a relatively paltry $4.36 million from Cheung Kong. Including the $4.44 million he was paid in salary as deputy chairman of Hutchison, Victor Li made a total of $69.78 million last year.

Mr Fok, the chief spokesman and salesman for Hutchison's troubled global third-generation mobile-phone roll-out, does not appear to have earned a pay rise last year. In 2002, he was understood to have made between $125 million and $125.5 million.

Hutchison's deputy managing director, Susan Chow Woo Mo-fong, made $34.46 million last year, including $26 million in bonus payments, while finance director Frank Sixt made $32.67 million.

The listing of directors' pay by name in annual reports became mandatory from Thursday under stock exchange listing rules implemented after more than two years of heated debate.

In the past, companies were only required to disclose the pay of top directors in band form without identification, a policy lagging international standards that was criticised for lacking transparency.

The exchange introduced the change despite fierce opposition from many company directors, with some arguing that disclosure of pay by name could make them kidnap targets. In May 1996, Victor Li was kidnapped in Deep Water Bay Road. He was released a day later after a ransom was paid.

Hutchison Whampoa group managing director Canning Fok Kin-ning, long reputed to be Hong Kong's highest-paid executive, made $343,150 every day last year - a fact revealed yesterday when the Li Ka-shing-controlled conglomerate became one of the first blue-chip companies to list directors' pay by name.

The company's annual report, released online yesterday, shows Mr Fok made $125.28 million last year. His boss, Cheung Kong and Hutchison chairman Mr Li, made $60,000 for the whole year - all from director's fees.

Mr Li is understood to make a lot more money from his share-trading activities.

Hong Kong's median monthly wage is $9,500.

Mr Fok's pay package, which included a $113.5 million bonus on top of a salary of $9.77 million, accounted for 48.2 per cent of the money Hutchison spent on its directors.

Mr Li's eldest son, Victor Li Tzar-kuoi, had a higher salary as managing director of Cheung Kong - $27.62 million - but trailed badly in the bonus stakes, picking up $30.52 million from Hutchison and a relatively paltry $4.36 million from Cheung Kong. Including the $4.44 million he was paid in salary as deputy chairman of Hutchison, Victor Li made a total of $69.78 million last year.

Mr Fok, the chief spokesman and salesman for Hutchison's troubled global third-generation mobile-phone roll-out, does not appear to have earned a pay rise last year. In 2002, he was understood to have made between $125 million and $125.5 million.

Hutchison's deputy managing director, Susan Chow Woo Mo-fong, made $34.46 million last year, including $26 million in bonus payments, while finance director Frank Sixt made $32.67 million.

The listing of directors' pay by name in annual reports became mandatory from Thursday under stock exchange listing rules implemented after more than two years of heated debate.

In the past, companies were only required to disclose the pay of top directors in band form without identification, a policy lagging international standards that was criticised for lacking transparency.

His boss may be richer but Canning Fok, managing director of Hutchison Whampoa Ltd, continues to do well for himself.

Li Ka-shing's right-hand man is believed to have been paid about HK$125 million (S$28 million) in 2002, a 19 per cent raise from the previous year, based on information in the annual report of the sprawling ports-to-telecoms conglomerate. Hutchison chairman Mr Li, Asia's wealthiest businessman, was paid a mere HK$50,000 director's fee, which he turned over to sister firm Cheung Kong (Holdings), the report said.

The report did not identify Mr Fok by name as the highest-paid director, but he is widely believed to be the recipient of the fattest pay packet at the company, whose shares had slid 38 per cent in the 52 weeks through Monday.

Forbes magazine last year identified him as the highest-paid executive in 2001 among the world's 50 largest firms outside of the United States by market capitalisation, earning an estimated US$13 million that year.

In 1999 a Hutchison director - widely believed to be Mr Fok - took home a US$26.4 million bonus after Hutchison scored a hefty US$15.12 billion profit on the sale of its Orange mobile phone business to Germany's Mannesmann. - Reuters   Business Times 02 Apr 2003

Hutchison Whampoa group managing director Canning Fok is being touted as the top earner in Hong Kong last year after raking in $105 million, according to the company's annual report released last night.

Hutchison reported a 60 per cent fall in net profit for last year, at $12 billion. The company's highest-paid executives suffered a 12 per cent fall in salaries, according to the report, with only Fok earning $105 million.   - 2002

   >> Frank Sixt featured on cover of CFO Asia

Executive directors Susan Chow and Frank Sixt were likely to be the second and third highest earners in the company, with respective salaries of $28 million and $27 million last year.

Fok joined Hutchison in 1984. Fok went to Britain to restructure the company's then Orange mobile phone business. He with Frank Sixt finally got Orange in the black before listing the company. His efforts in helping Germany-based Mannesmann buy Orange in 1999 made a profit of $118 billion. Following a bonus of $180 million, Fok's income that year was $200 million.

The information technology bubble in 2000 boosted salaries of people such as Pacific Century CyberWorks (PCCW) deputy chairman Francis Yuen, who earned more than $280 million. While Fok earned only $120 million that year, Yuen took away the best annual wage.

PCCW's 2001 annual report out this week revealed Yuen's salary had dropped to $26 million.

Despite the economic downturn, the number of staff working for Hutchison increased by 57 per cent to 77,000 worldwide last year. But total salary expenses, excluding directors' remuneration, only increased by 30 per cent to $10 billion.  -  2002 April 13  iMail     

Li's our idol, say bosses

Hong Kong tycoon Li Ka-shing has been voted one of the top 10 world business leaders respected and admired by senior executives on the mainland.

Bill Gates, boss of global software giant Microsoft, heads the ``list of top 10 commercial idols'' published by a Beijing-based business weekly.

Gates impresses Chinese executives as a ``workaholic''. He is the richest man in the United States with a fortune estimated at US$52.8 billion (HK$411.84 billion).

Following Gates is Jack Welch, GE's former chairman and chief executive, who is nicknamed ``Neutron Bomb'' for his lively work style and no-nonsense reform of the company. Welch cut GE's workforce almost by half, from 400,000 to 220,000, in his first 10 years.

Then comes the late Konosuke Matsushita, former chairman of Japan's Matsushita Electric Industries, whose nickname was ``Listener''.

When he died in 1989, Matsushita left an estate of more than US$1.5 billion.

Li, chairman of property developer Cheung Kong (Holdings), ranks at No 4 on the list of business idols.

Li is admired as ``A Man who Can Bear Hardships''.

In July, Li was voted the most impressive Chinese businessman in a poll of 4,236 residents in 10 cities across the mainland, including Beijing, Shanghai and Guangzhou.

The 74-year-old magnate has a fortune estimated by Forbes at US$10 billion.

He is followed by News Corp chairman Rupert Murdoch who is called an ``Adventurer''.

Andy Grove of Intel, nicknamed ``Single-Minded Man'', is in sixth place.

International financier George Soros is seen as a market ``Sniper'', and is admired on the mainland for his suspected involvement in the 1998 attack on Hong Kong's currency led by hedge funds.

At No 8 is Liu Chuanzhi of Hong Kong-listed Legend Group who is dubbed ``Smiling General''.

Designer Coco Chanel is viewed as an ``Elegant Lady'' and ranks at No 9.

Completing the list is Hugh Hefner, founder and editor-in-chief of adult magazine Playboy, who not surprisingly is called ``Playboy''.

The list was produced by Beijing-based Chinese-language weekly Business Watch, which polled about 200 senior business executives in Shanghai, Beijing and Guangzhou.

The executives ran companies with more than 300 workers and their annual salaries were about 400,000 yuan (HK$377,040) each.   - 2002 December 17 Hong Kong Standard      

Sizing Up Sages - Buffet v. Li

How does Li Ka-Shing, the billionaire chairman of Cheung Kong and Hutchison Whampoa, stack up against Warren Buffett? Like the Sage of Omaha, Li has become known for circling distressed companies; recently, that meant Global Crossing. It's a comparison brought up by Richard McConnell -- an investor with a Hong Kong money management company called South Ocean Partners -- in his recent newsletter to his clients.

To start, the obvious points: Buffett, through Berkshire Hathaway, gravitates to established "old economy" companies, observes McConnell. Li, through Cheung Kong, likes real estate and telecom. Both are opposed to balance-sheet debt. Buffett avoids day-to-day management responsibility; Li works closely with managers in day-to-day operations. Buffett rarely shares his investments with partners; Li has numerous partnership holdings and minority interests. And finally, Buffett has never paid a cash dividend. Li has boosted Cheung Kong's dividend every year.

Berkshire Hathaway owns a broad range of companies in varied industries, including Coca-Cola, Gillette, Wells Fargo, General Reinsurance, as well as a candymaker, a boot company and a brick producer.

Meanwhile, Li's portfolio, McConnell reports, is "largely a collection of forward-looking companies," including third-generation mobile operators, container port facilities, logistics services, genomic research outfits, Internet Websites (among other things, he bought control of Priceline), and e-commerce contracts with the Hong Kong municipal government. Li also has varied investments in China. Many of these investments are owned by Cheung Kong's 50%-owned subsidiary, Hutchison Whampoa. Cheung Kong also has Hong Kong's largest real-estate developer and "its strongest balance sheet," says McConnell. Together, Cheung Kong and Hutch account for 15% of the Hang Seng index.

So who's on first? Buffett. Berkshire has grown earnings 19% over the past decade, McConnell says, while Cheung Kong has compounded earnings at 14.3%. Berkshire stock has also returned 24% a year on average over the past decade to a recent $73,300 a share. Hutch has returned 20% a year and traded last week at HK$67; Cheung Kong gained 16% and changed hands at HK$71.

Which investor does McConnell admire more? McConnell maintains that Buffett benefited from "a head start" at the knee of value investor Ben Graham; Li got his chops on the streets of Hong Kong and went on to found the Hong Kong real estate industry. And today, says McConnell, Li "has a portfolio with technology's promise to replace his stalled real-estate holdings. None of his competitors had the foresight to do this." Moreover, he dismisses Buffett's holdings as being "in mundane industries dependent upon superior management of his selection. They are companies without technology's promise that will lose their aging managers and aging chairman soon without plans for replacement."

And although sentiment is lousy for telecom operators, Li's portfolio "will reach the world's consumer market"; Buffett's, he sniffs, is "provincial."

Says McConnell: "The question of who has produced the greatest rewards for their shareholders is a question that today might go to Buffett, but in five years no way! If you plow back your dividend from Cheung Kong into Cheung Kong stock, the race may go to K.S. Li."  -   2002 February 25          by Leslie P. Norton       Barron's          

DEALMAKING

Asia's Superman swoops again
Is  Li Ka-shing really the superhuman investor that Asians think he is?

In all honesty, most of Asia's tycoons, no matter how illustrious they appear at home, are really keepers of glorified mom-and-pop stores. The main exception is Li Ka-shing.  This is not because Mr Li dominates the economy of Hong Kong, where he runs most of the port (the world's biggest), has the monopoly on supplying electricity to the main island, ranks among the territory's top landlords and retailers, and owns the biggest mobile-phone operator. Rather, it is because he, alone in his region, regularly makes his powers felt all over the world, and even influences the future of whole industries.

At the moment, this is most evident in the telecoms industry. On August 9th, one of Mr Li's two main holding companies, Hutchison Whampoa, joined with a Singaporean partner to scoop up 61.5% of Global Crossing, a bankrupt American company with a global network of fibre-optic cables, for $250m. Inevitably, this invited comparisons between Asia's most famous investor and America's,Warren Buffett, who is also bottom-fishing for distressed telecoms assets.

Mr Li will make an even bigger impact this autumn, when Hutchison starts rolling out third-generation (3G) mobile-phone services in Britain, Italy, Sweden, Australia, Hong Kong, Israel and Austria.

Europe's telecoms incumbents may be delaying their 3G launches, and investors may worry that the technology might flop, but Mr Li is undaunted.

This has produced two very different reactions. The markets-ie, mostly non-Asian fund managers-are punishing Mr Li for this gamble, and have marked Hutchison shares down by over half since early 2000. On August 8th, Standard & Poor's, a credit-rating agency, said that it too was pessimistic about the outlook for Hutchison and its sister company, Cheung Kong.

Retail investors and the general population of Hong Kong, however, see it differently. In their minds, there is no question that Mr Li-whom they call Chiu Yan, or Superman-is infallible.

When Mr Li launches a company, with or without a business plan, and lists its shares, they rush to buy-as they last did in July, when the initial public offering of Mr Li's life-sciences start-up was 120 times oversubscribed. If Superman now thinks that 3G is the future, why doubt it?

The people of Hong Kong remain wowed by Mr Li because, to them, he epitomises success, a mystique he is adept at cultivating. Hong Kong is a superstitious place, and it helps that Mr Li was born in 1928, an auspicious dragon year. His key buildings are blessed with excellent feng shui. He sets his watch eight minutes early, because “eight” sounds like “prosperity” in Cantonese. He regales his visitors with stories about his cheap watches to show what a simple, ascetic man he still is. He pouts self-pitifully (“Do you not want me to invest anymore?”) every time anyone dares to suggest that he is growing too powerful-and many do, all the more so now that Mr Li has said he wants a Hong Kong television network in addition to the local radio station he already owns.

Such controversies aside, does Mr Li deserve his reputation? In part, his success can be explained by luck: he has been in the right place at the right time. From the 1980s to 1997, Hong Kong property was a one-way ticket to wealth, since the colonial government had a policy of restricting the supply of new land for building. Mr Li was among several developers who simply rose with land prices. Similarly, once he secured his niche in the containerport, he piggy-backed on Hong Kong's rise as a trading hub. In 1997, when other Asian tycoons stumbled with their currencies, Hong Kong's dollar peg kept him standing.

Luck, however, is only part of it. Alone among Hong Kong's property tycoons, Mr Li knew when to branch out overseas and into new industries. Equally rare, he always found and hired the best professional managers, many of them foreigners. Most importantly, his investment record has, so far, outperformed that of all other Asian tycoons. Everyone who has worked with him raves about his nose for opportunity.

Like Mr Buffett, he appears to look for value, but comparisons with the Sage of Omaha are overdone. Mr Buffett crunches piles of numbers in the search for undervalued companies, then holds their shares indefinitely. Mr Li, by contrast, is, on the face of it, the archetypal Asian asset-trader. He tries to time the market. He is patient but swoops with phenomenal speed when opportunities present themselves. Global Crossing is a case in point.

It has few synergies with Mr Li's other telecoms assets. Mr Li first made an offer in January, then withdrew it, and then came back with a new offer, two-thirds lower.

More than just a trader Yet even the label “asset-trader”, appropriate for most Asian tycoons, appears too small to fit Mr Li. Transactions have made him famous-his biggest coup was the perfectly timed sale in November 1999 of his stake in Orange, a British mobile-phone operator, for a profit of around $15 billion. But he also knows how to build a business. In Orange's case, he had nursed it for years before the sale. That skill, Mr Li's fans reckon, should ensure that he will be able to turn 3G into a winning proposition.

Clearly, Mr Li ought never to be underestimated. On the other hand, his record has blemishes, though few remember them. In the 1980s, he invested in a Canadian oil company that went on to underperform for years. Even in mobile telephony, his first venture in Britain, called Rabbit, flopped. Ultimately, the best way to analyse Mr Li may be to compare him with celebrity fund managers who, for whatever reasons, outperform for some time, then use their fame to play with ever bigger sums and, sooner or later, start underperforming just like everybody else."   - 2002 August 15      The Economist  

Note:  In the end, Singapore Technologies took this deal on its own.

Hutchison may curb its role

Hutchison Whampoa Ltd, as part of a revised bid to win US approval for its purchase of bankrupt Global Crossing Ltd, may agree to limit its role managing the company, people familiar with the matter said.

A US government committee had asked Hutchison, which is controlled by Hong Kong billionaire Li Ka-shing, and its partner, Singapore Technologies Telemedia Pte, for assurances that the acquisition of Global Crossing's fibre-optic network will not compromise national security.

Global Crossing's network transmits communications for US agencies, and the panel had concerns that China might interfere with Hutchison's management.

Under the existing plan, approved by a bankruptcy judge, the companies would have joint say over management. The parties are now discussing a plan in which Hutchison may act as silent partner, making an investment and vesting its management control in another party, people said.

'The government is in the driver's seat and can say, 'We're not going to allow you to take over this company unless you do what we tell you to do',' said Ivan Eland, a senior fellow at the Independent Institute, an Oakland, California-based policy research organisation.

Steve Lipin, a US-based spokesman for Hutchison, said the process 'is highly confidential and therefore we cannot comment. We continue to cooperate with the US government to address any concerns.'

Hutchison and ST Telemedia last year agreed to take a 61.5 per cent stake in Global Crossing after the Hamilton, Bermuda-based company emerges from Chapter 11, expected this year.

The Committee on Foreign Investments in the US, which is chaired by representatives of the US Treasury Department and includes members of the State, Commerce and Justice Departments, made the request for revisions.

The committee told the companies it needed more evidence the 27-nation fibre-optic network would remain secure if the purchase is completed, people familiar with the matter said earlier last week.

Under a change being discussed, Hutchison would cede its four seats on Global Crossing's board to independent directors, a source said. Hutchison has considered several possibilities, including the appointment of prominent US politicians or businessmen to act as its proxies on its behalf on Global Crossing's board, sources said on Friday.

Hutchison is not thought to be considering reducing the stake it would hold in Global Crossing.

'We continue to cooperate with regulatory authorities in completing the approval requirements to consummate the transaction,' Global Crossing spokeswoman Tisha Kresler said in a statement. -  2003 March 3  Bloomberg, NEW YORK TIMES  

Global Crossing and its creditors agreed yesterday to sell control of the company for $250 million to two Asian companies, three months after the creditors rejected a $750 million offer from the same bidders.

After many delays and months of negotiations, Global Crossing, a once-highflying international telecommunications concern, announced a deal with Hutchison Whampoa of Hong Kong and Singapore Technologies Telemedia, a unit of Singapore's state-run phone company.

Soon after Global Crossing filed for bankruptcy protection in the spring, the Hutchison group offered $750 million in cash for about 79 percent of the company, implying an overall value of about $950 million.

Confident that they could get more for control of Global Crossing, which has assets valued at more than $20 billion, the company's creditors rejected that offer.

At least two other groups, one led by Platinum Equity, a private investment firm, and another led by an investment fund backed by Bank One, submitted bids for Global Crossing. But over the summer, as other telecommunications carriers like Qwest and WorldCom imploded amid accounting scandals, the bids for Global Crossing have become smaller and smaller.

Under the terms of the deal, Hutchison and Singapore Technologies will end up with 61.5 percent of Global Crossing after the $250 million investment, implying an equity value of only about $407 million, less than half the value associated with the original bid.

Still, John Legere, Global Crossing's chief executive, declared a victory in yesterday's announcement.

"This is a textbook model for a successful strategic investment," he said in a statement. "Hutchison Telecommunications and Singapore Technologies Telemedia are highly respected telecom companies with assets and skills that complement Global Crossing's unmatched global network. With our turnaround well under way, and the support of strong new strategic partners, Global Crossing is poised to become the global leader providing networking services to enterprises and carrier customers in more than 200 of the world's top cities."

Before that can happen, however, the company must contend with about 60 shareholder lawsuits and investigations of its accounting by the Justice Department, the Securities and Exchange Commission and Congress.

A bankruptcy judge in New York gave the deal his preliminary approval yesterday, and the company and the winning bidders must develop a formal plan by the middle of next month.

During the telecommunications boom of recent years, Global Crossing amassed more than $12 billion in debt and achieved a peak market value of almost $50 billion as it built a global web of undersea communications lines. The company's founding executives, led by Gary Winnick, sold hundreds of million of dollars of stock before the company collapsed amid accounting scandals. Under yesterday's deal, the company's public shareholders will receive nothing.

After the deal is completed, the company plans to give a total of $300 million in cash to the banks that originally lent it about $2.6 billion. The banks would also receive new notes worth about $175 million and would own about 6 percent of the company.

The company's other creditors, including bondholders, are to receive 32.5 percent of the company and $25 million in notes.

"Global Crossing presents an attractive business prospect for Hutchison," Canning Fok, Hutchison's group managing director, said in a statement yesterday. "Our investment in the company, which owns substantial broadband network capacity, is in line with our vision to be a leading global telecommunications player."   -2002 August 10  New York Times    

Hong Kong and Singapore, 9 August 2002 - Hutchison Telecommunications Limited (Hutchison) and Singapore Technologies Telemedia Pte Ltd (ST Telemedia) today announced that they have signed an agreement with Global Crossing to invest US$250 million for 61.5 percent majority interest in the company as newly constituted. Global Crossing's creditor groups support the agreement  >>  PRESS RELEASE

NEW YORK (Reuters) - Global Crossing Ltd., in a bid to survive one of the biggest bankruptcy proceedings ever, on Friday struck a deal giving control of the once high-flying phone company to two Asian investors for just pennies on the dollar.

While Friday's deal addresses the huge financial cloud hanging over the Bermuda-based company -- operator of a fibre-optic telecommunications network connecting more than 200 cities in 27 countries -- Global Crossing still faces a morass of legal problems stemming from questionable accounting practices and possible insider trading by its chairman.

Under the deal, Hong Kong's Hutchison Whampoa Ltd. and Singapore Technologies Telemedia Pte would gain 61.5 percent control of Global Crossing -- whose estimated assets top $22 billion -- in return for an immediate, $250 million cash infusion. That is far less than their original offer of $750 million for a 79 percent stake rejected by creditors as too low an offer for that big a stake.

"At this point, all we have to say is we're very happy with the people investing in the company," Global Crossing Chief Executive John Legere told Reuters on Friday after a bankruptcy court hearing on the matter.

When the company completes the bankruptcy reorganisation, the Hutchison group will pay Global Crossing's creditors $300 million in cash and issue them $200 million in new debt, a quarter of the $800 million in new debt originally offered. The creditors will then own the remaining 38.5 percent of the company, and existing shareholders would be wiped out.

The agreement includes Global Crossing's 58 percent stake in its Pacific Rim affiliate -- Asia Global Crossing Ltd. . It also includes three noncore businesses that Global Crossing had hoped to sell in the bankruptcy process, but for which it received bids considered too poor to accept.

COULD EMERGE FROM CHAPTER 11 IN EARLY 2003

The agreement, approved in principle on Friday morning by U.S. Bankruptcy Court Judge Robert Gerber in Manhattan, sets the stage for Global Crossing to emerge from bankruptcy early next year, albeit with new ownership. In January, it filed what was then the fourth-largest Chapter 11 petition on record.

In approving the agreement, Judge Gerber called the deal "the best of both worlds", given the current depressed state of the global telecommunications industry, which has witnessed the collapse of a number of one-time big players.

The latest of Global Crossing's peers to enter the bankruptcy arena is WorldCom Inc. , the No. 2 U.S. long-distance phone company, which filed the largest-ever Chapter 11 petition last month amid a mushrooming accounting scandal.

Global Crossing buckled under $12.4 billion in debt, falling prices, and a glut of high-speed network capacity -- which it couldn't sell. Like WorldCom and others in the sector, its accounting practices are under investigation by the U.S Justice Department, the Securities and Exchange Commission, and the U.S. Congress, as well as facing some 60 shareholder lawsuits.

Congressional investigators also want to talk to Global Crossing Chairman Gary Winnick about the hundreds of millions in stock sales he made just ahead of the company's collapse into bankruptcy.

Those issues remain unresolved, but CEO Legere insisted the investigations pose no threat to the Hutchison group deal.

The Global Crossing parties now must submit a formal plan to the court by September 16, following which the reorganised firm could exit the bankruptcy process in January 2003.

NEW DEAL WITH OLD PARTNERS

At the time Global Crossing filed for bankruptcy, the company had penned a preliminary deal with Hutchison and Singapore Tech to sell them nearly 80 percent of the company, for $750 million.

That deal fell apart in May because attorneys for Global Crossing's creditors said the offer was too low for a company with an estimated $22.4 billion in assets, including its coveted fibre-optic cable network.

Under the new deal with the Hutchison group, Global Crossing's bankers, which lent the company about $2.55 billion over time, would take away all $300 million of the cash being offered, as well as $175 million of the notes. In exchange, though, they would receive the smallest stake in the company -- 6 percent.

Nonbank creditors, such as bondholders, would receive just $25 million in notes but will own 32.5 percent of the company.

Joseph Ryan, an attorney for the unsecured creditors committee, said bondholders were satisfied with the new terms because it gives them a larger stake than they would have received under the Hutchison group's original offer. -  2002 August 10     Reuters | Yahoo!     

Creditors asked to take 84pc haircut in restructure
Hutchison Whampoa and Singapore Technologies Telemedia (STT) have asked Global Crossing creditors to take a 84.2 per cent haircut on US$7 billion they lent the company.

According to a document submitted to a New York court, 21 per cent of the restructured international Internet protocol network provider would go to its creditors, while Hutchison and STT would have a combined 79 per cent. Global Crossing shareholders would get nothing in the restructuring.

The document, presented to the United States Bankruptcy Court, details the two potential white knights' debt-restructuring proposal and future business plan for Global Crossing.

On January 28, the day Global Crossing filed for Chapter 11 bankruptcy, Hutchison and STT submitted a US$750 million proposal to take it over. Under the proposal, they would each invest US$375 million cash.

Since then, at least one other company has shown interest in taking over Global Crossing assets.

Long-distance and prepaid-calling-card telecommunications company IDT Corp was reportedly talking to Global Crossing on buying assets from its subsidiary, Frontier.

Under the Hutchison/STT proposal, Global Crossing's creditors would receive US$300 million in cash and US$800 million in new debt securities, in addition to the 21 per cent stake.

All of Global Crossing's existing bank and bond debt, preferred and common shares, as well as other claims against the company, would be written off in the restructuring.

Last week, angry Global Crossing investors launched a class-action lawsuit against the company.

They are complaining that its preliminary agreements with Hutchison and STT would transfer billions of dollars of assets to them at a bargain-basement price.

According to the court document, Hutchison, STT and Global Crossing have set minimum performance targets for Global Crossing to make US$2.05 billion in service revenues and US$222 million in service earnings before interest, tax, depreciation and amortisation, in the first nine months of this year.

Creditors soon will begin talks with Global Crossing management, Hutchison and STT. The deadline for submission of rescue bids is late April, and an auction will be held in mid-May if qualified bids are submitted. The completion date of the rescue deal is expected in September.

Global Crossing is reportedly facing a US Securities and Exchange Commission investigation.   - 2002 February 7  SOUTH CHINA MORNING POST                       

The conglomerate will pay US$375 million for 37.5 per cent in the troubled company.

Hutchison will partner Singapore Government-controlled Singapore Technologies Telemedia (STT), which will take an equal stake, to secure a majority holding.

Hutchison said the transaction was conditional on confirmation of a reorganisation plan by US courts before the end of August.

The Chapter 11 declaration by Bermuda-based Global Crossing, which had been widely expected, is one of the largest such filings by a telecoms company. It said it had US$22.4 billion in liabilities and US$12.4 billion in assets.

Under the reorganisation plan, existing common equity and preferred shareholders will not get a stake in the restructured company. Global Crossing said its creditors would get a combination of cash, new debt and new equity.

Global Crossing struggled with debt incurred from building its global network, which links more than 200 major cities in 27 countries.

Trading in shares of Global Crossing were halted for the Chapter 11 announcement. The stock has fallen about 96 per cent over the past year and closed last Friday at 51 US cents.

The company said its worldwide operations would be unaffected by the filing.

Global Crossing said it and certain of its affiliates began Chapter 11 proceedings in the US Bankruptcy Court for the Southern District of New York, and co-ordinated proceedings in the Supreme Court of Bermuda.

Hutchison already has a business relationship with Global Crossing.

Affiliate Asia Global Crossing and Hutchison each own 50 per cent cent of Hutchison Global Crossing, which provides fixed-line, Internet and data services. Asia Global Crossing said yesterday it was not one of the affiliates that filed for Chapter 11 protection with Global Crossing.

Last night, Hutchison and STT said: "We are excited about the prospects of working with Global Crossing management and the opportunity presented by this transaction to develop and strengthen Global Crossing business."

It is the second time Hutchison Whampoa has stepped in to help rescue a troubled US firm. Last year, Hutchison, together with its parent, Cheung Kong (Holdings), acquired 30 per cent in online ticket auctioning business Priceline.com.

Analysts said Hutchison was doubling its Global Crossing investment in hopes of recovering some of its losses in the ailing company.

Hutchison is not the only Hong Kong company which has been buying US telecommunications assets.

Last month, Pacific Century CyberWorks bought the Asian assets of Level 3 for Reach - its joint venture with Australia's Telstra.   -  2002 January 29   by Ben Kwok    South China Morning Post      

Hutchison network at milestone

Hutchison Global Crossing has become the No 2 fixed network operator in Hong Kong, after raising its number of lines to 240,000 this month, according to chief executive Peter Wong King-fai.

The company doubled its lines this year, surpassing the 220,000 lines of competitor Wharf New T&T, a unit of the Wharf group.

The milestone was reached despite the financial difficulties afflicting one of the company's major shareholders.

Hutchison Global Crossing is a joint venture between Hutchison Whampoa and Asia Global Crossing, whose US-listed controlling shareholder Global Crossing is on the edge of bankruptcy. Reports have cited Hutchison as a potential saviour for the company, which has US$10.9 billion in debt and preferred stock.

Mr Wong said Hutchison Global Crossing was poised to reach break-even, or positive earnings before interest and tax next year. The venture no longer needed capital from the two companies after securing a HK$4.4 billion loan in September, he said.

Three-quarters of Hutchison Global Crossing's lines are operated by its own network - the highest among the non-dominant operators.

Other fixed-line operators rely heavily on inter-connection with the network of Pacific Century CyberWorks, which has been criticised for allegedly stalling their progress.

"We have spent the first six or seven years building our network. This is like a jig-saw puzzle. When we put it together, you know how much we have achieved," Mr Wong said.

Mr Wong said that by investing HK$11 billion, of which HK$6 billion was already committed, the company planned to cover half the local population in three years.

It has now provided access for more than 2,000 buildings in Hong Kong. Out of the 240,000 lines it operated about 60 per cent (144,000 lines) were for commercial use. About 40 per cent (96,000 lines) were residential. Half of these were non-Hutchison group-affiliated property projects. The company's network covers more than 40 public housing estates.

Turnover rose almost 16 per cent year on year to US$37.33 million for the three months to September.

Net loss was US$12.67 million, 18.55 per cent higher on a year-on-year basis but 7.6 per cent lower than its second-quarter loss of US$13.72 million.

For the first nine months, turnover was up 13.83 per cent year on year to US$103.57 million, while its net loss was 45 per cent higher at US$39.88 million.

Hutchison Global Crossing excluded from its results the contributions of its data centre and electronic service delivery operations, which started at the beginning of the third quarter.

Unlike other operators whose major revenue streams relied on international direct dial business, Hutchison's Global Crossing has a quarter of its revenue contributed by its IDD business, with most revenue generated from fixed-line and broadband business.

Its broadband users surpassed 400,000 in April, or about 22.2 per cent of total home passes in Hong Kong. Its broadband unit had been growing "very fast" since July, according to Mr Wong.

Top operators in Hong Kong are adding an average of 10,000 users a month.

"The broadband business is still a virgin market in Hong Kong," he said. "It will be the battlefield for operators next year."  -  South China Morning Post     

TELECOMS

Master Li picks his fruit at its ripest

Few so instinctively grasped the rhythm of market cycles. Mr Li may leave little by way of a grand legacy but he can rightly claim to have taken the "art of the deal" to new heights.

While the pace of European telecommunications deals must have surprised even him, the trading strategy was one honed in Hong Kong over 40 years.

Hutchison Whampoa's October sale of Orange to Mannesmann, that firm's later takeover by Vodafone AirTouch, the purchase of a Ł4.3 billion (about HK$50.54 billion) British third-generation (3G) mobile-telephone licence and now the move into a bigger telecoms grouping has left it with almost HK$200 billion in liquid assets.

Analyts are impressed and want more. Mr Li will give it to them with a planned spin-off of Husky Oil, just as oil prices hit US$30 a barrel.

This follows the opportunistic float of two-month-old Tom.com during the technology boom earlier this year, which typified the Li trading mentality. However, that was small potatoes compared to the European 3G licence bonanza.

The Netherlands' KPN Mobile and Japan's NTT DoCoMo will respectively buy 15 and 20 per cent stakes in Hutchison 3G UK Holdings for a total Ł2.1 billion.

This deal alone should yield Hutchison a HK$6 billion exceptional profit. It also commits Hutchison and KPN to jointly bid for a German 3G licence. If successful, KPN will inject its 77.5 per cent stake in second-generation (2G) German mobile operator E-Plus into the planned 50-50 joint venture. While the companies will run competing services, they are to share the existing core network and develop a 3G platform.

Similar arrangements are expected across Europe. In France the three new partners are expected to bid for a 3G licence.

Merrill Lynch expects Hutchison to buy out France Telecom's 50 per cent stake in the KPN-Orange joint venture.

NTT DoCoMo brings its already proven 3G expertise running the i-mode service in Japan.

Suddenly, an exposed Hutchison looks to have traded its way out of trouble. After the Orange sale it lost its core telecoms management.

The escalation in 3G licence prices meant huge capital demands, even for its deep pockets.

Now, it has solid technology partners and a shared financial burden. The competing nature of its joint ventures could yet pose problems but Mr Li has a record of making such deals work.

All this still represents an enormous leap of faith. As a newcomer to the British 3G market, Hutchison must play catch up to 2G operators who have the advantage of migrating customers to the higher bandwidth service.

It is a moot point whether consumers really want the "fat pipes" offered by 3G or will stick with simple data and e-commerce services that a souped-up 2G will offer.

In particular there are big questions about who will benefit most from the coming mobile-commerce market.

Implicit in the huge licence fee payments is the belief phone companies can extract much of the value. It is equally possible so-called virtual network operators, such as Virgin, or Internet portals like Yahoo! or eBay, will dominate.

As such, Hutchison's sale of brand-rich Orange with its advantage of incumbancy could yet prove a mistake. Yet having made his 3G bet you have to admire Mr Li's pure trading skill for getting out of a tight spot - and with a big profit to boot.  -  2000 July 14     SOUth China Morning Post      

RETAIL

Hutchison Snaps Up 2000 Shops Across Europe for $1.2B

LONDON - Hutchison Whampoa added  700 Superdrug stores to its existing UK portfolio with the Ł800 million ($1.2 billion ) acquisition of Dutch retailer Kruidvat.

The Hong Kong conglomerate already owns 280 Saver health stores in the UK, which combined with Superdrug would make a near 1,000-strong estate of shops in this country. The company, as part of the Kruidvat purchase, will also be acquiring a a further 1,200 outlets on the Continent.

Superdrug, which has now changed hands twice in just over a year, is the UK's second-biggest chain of chemists after Boots.

NEWS STORIES

BRUSSELS  - The European Commission approved on Friday Hong Kong conglomerate Hutchison Whampoa Ltd's takeover of the Kruidvat Group, a privately-owned Dutch health and beauty retail chain. The 1.3 billion euro ($1.27 billion) purchase, made through Hutchison Whampoa's subsidiary A.S. Watson, will create one of the world's largest health and beauty chains, with combined sales of more than seven billion euros. A.S. Watson has 1,300 stores and 27,000 staff worldwide, but the bulk of its business is in Asia. The Kruidvat purchase will build on its acquisition in 2000 of the UK-based Savers chain, which now has 280 outlets, and expand its European presence from nine to 12 countries. Kruidvat's empire, with 1,900 outlets and 24,000 people in six European countries, includes Superdrug -- the UK's number two health and beauty chain with more than 700 stores -- and perfumery chain ICI Paris XL in the Netherlands and Belgium. It also has a 50 percent share of 209 Rossman health and beauty shops in Poland, Hungary and the Czech Republic. A.S. Watson's parent, Hutchison Whampoa, the ports-to-telecoms group controlled by Asia's richest businessman, Li Ka-shing, already has investments and operations in Europe, including ports, telecoms, property and water.   - 28 Sept 2002    Yahoo! Asia  Reuters Asian Tycoon snaps up pharmacy giant Hutchison plans to sell its mobile phones service at Superdrug Hutchison Whampoa, the ports to telecoms conglomerate controlled by billionaire Li Ka-shing, is to buy Dutch pharmacy giant Kruidvat. The 1.3bn euro ($1.2bn; Ł830m) takeover, which will give Hutchison control over the UK's Superdrug stores, will allow the formation of one of the world's largest health and beauty chains. Kruidvat profile Owns 1,900 outlets, including 700 Superdrug stores Has operations in six European countries Units include: Superdrug: UK ICI Paris XL: Netherlands, Belgium Rossmann: Poland, Hungary, Czech Republic The merger of Kruidvat operations with Hutchison's existing AS Watson unit will create a business with 3,000 stores and revenues of more than 7bn euros a year. And it will promote a Hutchison strategy of diversifying from its roots in Hong Kong. "In view of the current difficult economic environment, it is expected that the group will focus more on opportunities in Europe, mainland China and other Asian countries in the near term," said Mr Li, reportedly Asia's richest businessman. Competition fears More surprisingly, the merger will see Hutchison use its European drug outlets to distribute its third generation mobile phones, the firm said. Hutchison has stakes in mobile operators such as Vodafone and Deutsche Telekom, and was a large investor in Orange. The prospect of increased competition in the mobile retail sector sent shares in Carphone Warehouse almost 6% lower, although the shares recovered in afternoon trade to close up 2.5% at 83 pence. Stock in leading UK pharmacist Boots stood 2.2% lower over fears of a strengthened Superdrug, but also recovered to close flat at 574 pence. "Suddenly there's a very credible number two player in the UK market," said Nathan Cockrell, retail analyst at Credit Suisse First Boston. Powerful family Hutchison Whampoa is seen as having deep pockets with which to realise its aim of expanding its retail operations in Europe. It announced the purchase of Kruidvat as it unveiled group-wide profits of HK$5.95bn ($763m; Ł487m) for the first half of the year. And, in Mr Li, it has a boss who heads one of the richest and most powerful families in Hong Kong. As well as Hutchison Whampoa's multiple businesses, his family interests include giant property development firm Cheung Kong and Pacific Century Cyberworks, Hong Kong's biggest phone firm. Hutchison's takeover of Kruidvat will require approval from European competition regulators. -  22 August 2002    BBC News GROCER Park n Shop to open more $8 marts Park n Shop, the supermarket chain owned by Hutchison Whampoa, plans to beef up revenue by expanding its single-price store business. The 20-year-old supermarket chain denied its low-price strategy of HK$8 marts, which sells household items at a single price of HK$8, would trigger a new price war. ``The competition is always keen in the retail sector,'' said Teresa Pang, Park n Shop's public relations manager. ``Our expansion aims to satisfy growing customer demand using our huge network.'' The supermarket chain, which has 200 outlets, kicked off its single-price store business last year and now has 20 stores operating within its supermarket outlets. The stores offer about 1,000 everyday essentials, ranging from toys and batteries to stationery and storage boxes. Single-price stores are now the fastest growing segment in the retail industry worldwide. In the United States, for instance, about 1,000 new ``US$1 stores'' are opening every year, while there are already more than 8,000 ``100 Yen stores'' in Japan. In a bid to offset the slim margin on the goods it offers, Pang said the business strategy was to derive profit through large sales volume. -    2003  Janauary 1      Hong Kong Standard  Li's Midas touch buoys CK Life Li Ka-shing's magic has worked yet again with his latest stock market offering, CK Life Sciences International, attracting an overwhelming response from retail investors. According to sources close to the sponsor, the IPO was 100 times oversubscribed. Institutional demand for Li's biotechnology spin-off was also strong despite current subdued stock market conditions and was 10 times over-subscribed. The response came as a surprise after analysts had been unenthusiastic about the company's prospects. Due to the large oversubscription rate, the retail portion will now be raised to 50 per cent of the total offering from the original 10 per cent under a process known as the clawback mechanism. The institutional tranche will be slashed to 50 per cent. The Growth Enterprise Market listing candidate aims to raise up to HK$2.61 billion to fund its business by offering 1.31 billion shares, or 20.4 per cent of its enlarged share capital, at between HK$1.80 and HK$2 each. The offer is subject to a greenshoe option of an extra 159.25 million shares. Market sources said the informal grey market price of the stock stood at about HK$3. The issue's sponsor Salomon Smith Barney was not available for comment. CK Life Sciences will fix its IPO price tomorrow and will make its debut on Tuesday. Despite the huge response to CK Life Sciences, the reception cannot be compared with the frenzy sparked two years ago when Li sold shares in his Internet and media flagship tom.com. Tom.com's IPO, launched in February 2000, was 669 times subscribed, though the subscription rate failed to exceed the record 1,276 times achieved by red chip Beijing Enterprises (Holdings) in 1997. After the listing, Li's stake in CK Life Sciences will fall to 29 per cent from 36.7 per cent, while the stake held by his property flagship Cheung Kong (Holdings) will drop to 44 per cent from 55 per cent. CK Life was set up in late 1999. Its core business includes research and development in health and environmental areas. It offers eco-agriculture, bio-remediation, pharmaceuticals, nutraceuticals, and dermatological or skincare products. It has developed 108 product applications and three of them have been patented. The venture continues to be loss-making and expects to be in the red for the next several years. It recorded a net loss of HK$22.15 million on sales of HK$134,160 in the first quarter of this year. This compared with a net loss of HK$57.93 million on turnover of HK$148,200 in the year to December 31, 2001. The company plans to use about one-third, or HK$850 million, of its HK$2.48 billion IPO net proceeds on research and development.     - 2002 July 10       The Standard

ENTERTAINMENT
`Superman' leaps into films, taking 17pc of Harvest

``Superman'' Li Ka-shing is about to leap into the movie-making business in a single bound by taking a 17 per cent shareholding in Asia's premier film studio, Golden Harvest Entertainment.

The deal, likely to be approved by the stock exchange this week, is estimated to be around HK$30 million. It will make Li the second-largest shareholder of Golden Harvest, a movie studio that produced early blockbusters starring Bruce Lee and Jackie Chan.

Li's purchase, revealed by The Standard on Saturday, is expected to help Golden Harvest chairman Raymond Chow fend off an onslaught from listed entertainment players eSun Holdings and Stellar MegaMedia, also known as Strategic Media International.

eSun and Stellar MegaMedia are believed to have been eyeing the 17.01 per cent stake held by Taiwan's personal computer giant, Acer Incorporated. Golden Harvest brought in Acer as a shareholder in April 2000 to pre-empt hostile takeover bids from those two companies.

``Chow has been wanting to find a friendly partner to buy the stake from Acer,'' an informed source said, adding that Chow wanted to give signals to eSun and Stellar MegaMedia that the chance to control Golden Harvest was remote.

eSun, controlled by main board-listed Lai Sun Development, made another failed attempt in June last year by sweetening the offer with its lucrative film production unit, Media Asia, in exchange for Raymond Chow's 31.28 per cent stake in Golden Harvest, market sources said.

Golden Harvest has been in talks with several other prospective investors for a stake sale since 2002 but the negotiations were called off as the price offered was not appealing.

Spokesmen for Li's Cheung Kong (Holdings) were unavailable for comment yesterday. Meanwhile, local media reported that Cheung Kong is planning to invest HK$80 million to HK$90 million in a 40 per cent stake in privately held CR Airways. The airline is controlled by Robert Yip, chairman of China Rich Holdings. Shares of China Rich, a property development and healthcare firm listed on the main board, surged 21.62 per cent, or 0.8 HK cents, to 4.5 HK cents yesterday - the biggest percentage gainer of the day. The Hang Seng Index, in contrast, shed 309.2 points yesterday.

CR Airways is held by Yip's wholly owned Plus Force Assets. It is Hong Kong's third jet passenger airline, offering charters using a 50-seat Bombardier aircraft. - 2004 May 19     HONG KONG STANDARD    

INTERNET

TOM Group

Tom Group is in talks with state-run Xinhua Bookstore and other mainland press distributors to establish a joint venture that could herald a shift in the company's media-focused mainland development strategy towards incorporating large-scale property projects.

In an interview with Hong Kong media, Tom chief executive Wang Sing said the company was courting partners with low debt levels and large property portfolios, such as Xinhua, so a joint venture could also develop property and other non-distribution businesses to supplement its core sector's low profit margins.

"Publishing and distribution has a stable and huge revenue base but low margins," Mr Wang said. "Our internet operation carries a net profit margin of 35 per cent, publishing 10 per cent and distribution just 3 per cent.

"For example, if one [of our distribution partners] has a three-storey building, we can develop it into 20 storeys while keeping the lowest three as bookstores and have shops or hotels on the upper floors."

Tom's apparent determination to pursue mainland property projects heralds a potentially significant shift in the Li Ka-shing-controlled company's business model, which has previously emphasised acquisition-led growth in the internet, media and advertising sectors.

The company, which recently migrated from the Growth Enterprise Market to the main board, is also pursuing possible investment in the commercial operations of the Beijing-based Economic Observer newspaper and has expressed interest in taking a stake in Beijing Youth Daily's planned Hong Kong listing.

The move into a sector more aligned with Mr Li's interests could also involve collaboration with the tycoon's property flagship, Cheung Kong (Holdings).

"The distribution joint venture won't be small in scale and will involve an investment of hundreds of millions or billions of dollars," Mr Wang said, adding that details were expected to be finalised by the end of the year. "We will learn from Cheung Kong and do not rule out seeking support from it."

Xinhua, the mainland's largest book distributor and retailer, is remodelling to compete more effectively in a market that will be opened to foreign and private investment in December, in accordance with China's World Trade Organisation accession agreement. It had earlier outlined plans to restructure itself into a joint-stock company and bring in a foreign strategic partner as its second-largest shareholder.

"Xinhua has a complete network with its own logistics arrangements," Mr Wang said. "If we join, we would take part in information technology and logistics development, improve financial management, combine networks as well as leverage its capital and assets."

According to the Chinese Publishing Science Academy, publishing industry revenues reached 72.7 billion yuan in 2002 - the last year for which figures are available - and generated profits of 4.9 billion yuan.          -     SOUTH CHINA MORNING POST     9 Aug 2004

Whole new ball game for Tom

Li Ka-shing-controlled Tom Group is serving up a new revenue stream for its shareholders ... in the high-profile world of professional tennis.

Tom has secured the 10-year rights to host the China Open and will stage its first tournament from September 10-26 in Beijing, featuring Wimbledon women's champion Maria Sharapova, Serena Williams and a host of other stars.

Tom will lease the rights to stage the tournament to its 49 per cent-owned associate China Open Ltd while Tom's wholly-owned Media Serv Asia Services will provide organisational and management services for the event.

It will receive revenue from the leasing of title rights to China Open Ltd, plus 49 per cent share of profits of China Open Ltd over the next 10 years.

China Open Ltd is 51 per cent owned by Beijing Youth Daily Group, Media Serv managing director Lincoln Venancio said yesterday.

``China Open should be close to the scale of the Australian Open, which bagged about US$50 million [HK$390 million] at the beginning of this year,'' he said.

Total prize money and player compensation will be at least US$1 million, Venancio said, adding that 60 per cent of the total revenues will come from sponsorship and advertising, and the rest from television broadcasting, ticket sales and hospitality.

Tom chief financial officer Tommei Tong said the gross profit margin for hosting the Open will be more than 10 per cent, but less than 50 per cent.

The China Open will remain in the 2008 Olympic capital for a minimum of 10 years, until at least 2013, under the leadership of its tournament chairmen, National Minister of Sport Yuan Weimin and Beijing Mayor Wang Qishan.    -    HONGKONG STANDARD   13 July 2004 

Tom Online Has Head Start
On Its Rival Portals in China

BEIJING -- Tom Online Inc. is a rising star in China's Internet sector, challenging dominant portals Sina Corp., Sohu.com Inc. and Netease.com Inc.

Tom Online has received analysts' stamp of approval for its clear focus on China's high-growth market for wireless value-added services, and it is well-placed to capture opportunities in this fast-expanding sector. And the outlook for the stock is bright, with an upside potential of as much 90% in coming months.

A boom in short messaging service, or SMS, in China had helped the three major portals overcome the burst of the Internet bubble in 2001-2002. But now, SMS growth is slowing, and portals are turning to wireless value-added services, or wireless VAS, to maintain revenue from their mobile-phone customers.

Growth Spurt

Evolution Securities China Ltd. estimates China's wireless VAS market could jump 51% this year from $634 million in 2003, with most of the growth coming from 2.5-generation services like wireless application protocol and multimedia messaging, as well as interactive-voice-response, or IVR, products. Such systems use prerecorded voice databases to present options to people, typically over the telephone. One such product is TOMusic Plus, which allows people to vote for their favorite songs on the China Music Billboard directly from their mobile phone.

Based on first-quarter figures, Tom Online derived 92% of its revenue from wireless VAS. Of the total, non-SMS services contributed nearly 40%, a proportion analysts expect to rise in coming months.

Evolution analyst Jim Sun recommends a "buy" call on the stock, with a price target of $24.60.

"A lot of companies only focus on the short-message business, but Tom Online is leading in the much faster growth sectors in 2.5G and IVR," Mr. Sun said. "That's the difference between Tom Online and China's other Internet companies."

Strong Relationship

Analysts say Tom Online ranks among the top three providers of IVR, WAP and MMS services in China. Further, it enjoys a strong relationship with both of the nation's mobile-network operators, China Mobile Communications Corp. and China United Telecommunications Corp., instead of relying heavily on just China Mobile, the bigger player.

"Though we're the latecomer to this market, the competition is really not that fierce because you know who your competitors are and what they're doing," said executive vice president Elaine Feng, formerly a senior executive at rival Sohu.

"I see Tom as a very strong player. ... Tom Online has actually worked hard and been a lot more focused than even Sina or Sohu or Netease to get to where they are," said Safa Rashtchy, senior research analyst at U.S.-based Piper Jaffray & Co.

He has an "outperform" recommendation and a 12-month target price of $18.

Dual Listing

Tom Online was spun off from TOM Group Ltd., controlled by Hong Kong businessman Li Ka-shing, and listed on both the Nasdaq Stock Market and Hong Kong's Growth Enterprise Market in March.

Tom Online stock closed at 1.23 Hong Kong dollars (16 U.S. cents) on the Hong Kong Stock Exchange Friday. On the Nasdaq Stock Market, the company's American depositary receipts rose four cents to US$12.61, down from its initial public offering price of US$15.55.

While the other portals have a finger in several pies, including online gaming and e-commerce, Tom Online's obvious focus on wireless VAS for revenue clearly sets it apart from the pack.

"We asked ourselves whether a company such as Tom, which is not an incumbent, would be better off being everything to everyone or be specialized in one area. Our bias is towards the latter," Citigroup analyst Rohit Sobti wrote in a research report. He has a $17 target price for the stock.  - by Lena Lee      WALL STREET JOURNAL    12 July 2004

NEWS STORIES

AOL Sells Major Stake In CETV to tom.com

AOL Time Warner  Inc. sold a 64% stake in its Mandarin-language television station, CETV Ltd. in an all-share offer valued at 53.2 million Hong Kong dollars (US$6.8 million).

Tom.com will issue 21 million shares valued at HK$2.535 each to finance the deal. The Hong Kong Internet and outdoor-advertising company also will assume funding needs for the channel up to US$30 million during the next 30 months.

The deal allows AOL to cut its exposure to what had become a costly attempt to enter China's television market. CETV posted a loss of US$17 million on revenue of US$450,000 last year, tom.com said.

CETV's primary asset is the rights it was granted by Beijing to broadcast to a limited cable audience in China's southern Guangdong province. AOL had hoped that those rights, the first for a Western broadcaster, would lead to broader access to the rest of the mainland market. But the U.S. company hasn't converted that audience into meaningful revenue.

Tom.com Chief Executive Sing Wang said the two companies were "hoping to marry the best of" AOL's international expertise with tom.com's local expertise.

However, under the deal, tom.com, a four-year-old company with no experience running a television station, will assume all management, program production and advertising sales for CETV, diminishing the role of AOL, one of the world's largest media companies.

Mr. Wang said that he saw the channel's weak past performance as evidence that it still had great growth potential. He was confident that tom.com's 25-city network of ad salesmen could help carve out a bigger niche of China's fast-growing television-advertising market, valued at about $2.5 billion this year.

Though tom.com said that adding a television property to its holdings would complete its goal of being a multimedia company, the deal contains a call option that would allow AOL to buy back some or all of tom.com's stake in CETV until 2010.

AOL would be required to pay the higher of two options: either the fair market value or tom.com's original investment cost plus a portion of the internal rate of return generated by CETV.

Mr. Wang said that if tom.com's management is successful it still could reap a nice return, possibly turning its cash investment of US$30 million into as much as US$70 million. For AOL, that could turn out to be a costly way to win back an asset that was once considered the cornerstone of its China strategy.

The companies declined to disclose the present market valuation of CETV. However, Mr. Wang said the deal provides his company with a "very attractive entry" into China's television sector.   - By Gabriel Kahn    Wall Street Journal July 2, 2003

The agreement would cap months of effort by AOL to find a partner to help its money-losing Chinese television venture. It also would mark the first entrance into television media by Tom.com's founder, Hong Kong tycoon Li Ka-shing, whose holdings include interests in real estate, ports and telecommunications.

AOL, working through its subsidiary Turner International Asia Pacific Ltd., purchased the station in 2000. In February 2002, CETV became the first Western-owned station allowed by Beijing to broadcast directly into Chinese homes. Though the Chinese government granted CETV only a small audience in the southern province of Guangdong, AOL saw CETV as a vehicle that eventually would allow it to penetrate the enormous Chinese television market, which numbers 340 million television homes. But that market has been slow to develop for CETV, and its losses have mounted. AOL wouldn't disclose revenues or losses for CETV, but did confirm that the station has no precise timetable for when it could turn profitable.

Tom.com, an Internet, publishing and outdoor-ad concern controlled by Mr. Li, had been looking to acquire a television asset for some time. Last August it backed out of a deal to acquire a 32.75% stake in Asia Television Ltd., Hong Kong's No. 2 broadcaster, after it contended it couldn't conduct adequate due diligence on the company, a standard procedure in purchase negotiations.

Tom.com hasn't posted a profit since it was founded in October 1999, but lately its quarterly losses have been narrowing. In May, it reported an after-tax loss for the first quarter of 2003 of 42.9 million Hong Kong dollars (US$5.5 million), compared with a HK$74.9 million loss a year earlier.

It isn't immediately clear how acquiring a stake in CETV, with its small slice of the audience in the Cantonese-language-dominated Guangdong market, would complement Tom.com's business. Tom.com Chief Executive Sing Wang said in an interview last month that he was "trying to build a multimedia business" and that he sought "industry leadership" in each sector. His plan is to offer advertising to clients in a variety of media, from magazines to outdoor billboards to television.

But he conceded that CETV's small audience didn't grant him the broad access to Chinese television viewers he was looking for. "Obviously, there are properties out there with bigger reach, and if you could do a deal with those it would make our life easier," he said, noting that China's tightly regulated media market limited what Tom.com was able to acquire. The deal also represents a significant step back from the Chinese market for AOL. Stephen Marcopoto, Turner International's president, insists the company always had intended to bring in a strategic partner to CETV. "From day one we knew we'd need another piece of the puzzle," he said in an interview in June.

However, the channel's current stature seems far from the early expectations AOL had for it. When AOL relaunched CETV in February 2002, it hosted a lavish party in Beijing attended by its then-chairman, Gerald Levin, and numerous high-ranking Chinese officials. Since then it has refrained from investing heavily in original programming and has outsourced key functions such as ad sales to other companies. The sale of a controlling stake to Tom.com stands to further dilute AOL's ability to capitalize on the Chinese market.

"There is an argument that [Tom.com has] salespeople on the ground and can push [CETV] locally," says Vivek Couto, the executive director of Hong Kong-based consulting firm Media Partners Asia. "But they don't know much about broadcasting. It will be very interesting to see their channel's direction."    - By Gabriel Kahn    Wall Street Journal July 2, 2003

Tom.com to raise stake in Taiwan unit

Multi-media investment firm tom.com is considering raising its stake in its Taiwan publishing arm to 85 per cent in the next two months.

Chief executive officer Wang Sing said yesterday the company would send documents on the offer to minority shareholders of Cite Publishing Holdings for the further purchase of stake soon.

The consideration would be settled by issue of new tom.com shares, he added.

``We intend to increase the stake to more than 80 per cent, maybe up to 85 per cent,'' Wang said.

In December last year, tom.com announced it had agreed to sell the stake in Business Weekly and youth magazine Sharp Point in Taiwan to Cite, a new venture in which tom.com, as a result, holds 76.71 per cent and 241 Home Media Group shareholders have the remaining stake.

Wang said the Taiwan publishing arm's net profit margin had improved 10 per cent on a year-on-year basis, adding the company's online business had eight million Short Messaging Service registered users and 750,000 paid email users.

He said there might be some write-back of the provision made against the narrowband business assets while the broadband and online businesses would be integrated further to streamline the group's structure.

Wang also said a dispute with International Management Group had been settled.

In June 2001, International Management Group filed a lawsuit against tom.com for ceasing a sponsorship of the Chinese professional soccer league matches, and asked for compensation of US$9.2 million (HK$71.76 million).

Wang declined to disclose the terms of the settlement.

Tom.com is expected to announce its 2002 annual results early in March.

Wang said the company had a turnover of HK$1.6 billion for the year to the end of December and that it was very close to making a net profit for the September to December quarter last year.

Separately, tom.com said the company was no longer in any discussions with Thailand company GMM Grammy or its Taiwanese subsidiary 8866 Group on setting up a music joint venture on the mainland.

A spokeswoman for tom.com said the company had met executives of 8866 Group but there had been no further progress in discussions regarding future co-operation.  - By Anthony Tran      HK Standard          28 January 2003    

Tom to consolidate units

Multimedia investment firm tom.com plans to set up a sino-foreign equity joint venture to consolidate its 12 outdoor media subsidiaries in the mainland, sources said.

Under the new structure, minority shareholders of the subsidiaries will become shareholders of the new holding company to steer the outdoor media business, Hong Kong Economic Times reported, citing market sources.

``We expected something like this as tom.com's aggressive acquisitions really need some reorganisation to pave the way for corporate finance activities,'' one analyst said. Tom is finding it hard to get government and regulatory approvals from the Ministry of Foreign Trade and Economic Co-operation and the State Administration of Industry and Commerce to have direct holdings in the mainland outdoor media companies.

As a result, Tom has changed the original acquisition proposal, and will take control of the mainland firms by means of its nominee firm Kunming French Star Information Industry, which in turn has granted an option to tom.com to acquire all of its equity interest at any time.

Through the mainland-registered Kunming French Star, tom.com owns 60 per cent of Shandong Qilu International Outdoor Media, 60 per cent of Liaoning New Star Guangming Media Assets, 60 per cent of Shenyang Sano Global Media, 60 per cent of Siamen Bomei Advertising Lianhe, 50 per cent of Henan New Tianming Advertising and Information Chuanbo, 70 per cent of Qingdao Chunyu Advertising Chuanbo, 70 per cent of Southwest, 60 per cent of Fujian Seeout Guangming Media Advertising, 50 per cent of Beijing Yanhuang Times Advertising, and 50 per cent of Beijing Yanhuang Times Advertising.

Tom.com chief investment officer Robert Xie confirmed the company was aiming to reorganise its outdoor media business into a sino-foreign equity structure. Xie hoped the reorganisation would be completed by the end of this year. - Hong Kong Standard   2003 January 21

Tom.com in share swap plan to trim costs in Taiwan

Tom.com, billionaire Li Ka-shing's cross-media flagship, has agreed to swap a stake in the holding company of its Taiwanese magazines for more control in two publishers in a move to consolidate its business to trim costs.

According to the agreement, 23.29 per cent of Cite Publishing, which holds Tom's Business Weekly and youth magazine Sharp Point through Diamond Profits and Right Charm International respectively, will be sold to 241 shareholders of Home Media Group.

In return, Tom will increase its 49 per cent stake in a joint venture - HMG - with Home Media Group shareholders, to 76.71 per cent indirectly through Cite Publishing. HMG holds the entire stake of magazine PC Home and 99.97 per cent in book publisher Cite. Tom values Diamond, Right Charm and its HMG stake at a total of about HK$299,169.

``Cite Publishing Holding will serve as a common platform for further business expansion and integration by reducing paper, printing and production costs and effective sharing of back office functions,'' Tom said in an announcement.

``Cite Publishing Holding will work closely with tom's Hong Kong and mainland publishing units,'' the company said.

``Areas for co-operation and creating business synergies include know-how and experience exchange, copyright trading, operational management, distribution and advertising.''

Tom, which has shifted its focus from the Internet to traditional media business, is looking for ways to turn a profit next year after 10 quarters of net losses since its listing in 2000.

The company lost a net HK$168.6 million for the first nine months last year.

The Business Weekly, Sharp Point, PC Home and Cite deals were tom's purchases in Taiwan last year, making it one of the largest publishers on the island. It didn't make any Taiwanese purchases this year, but has invested elsewhere, such as the purchase of a 49 per cent stake in a venture with Popular Computer Week Publishing House & China Science Media on the mainland.    -2002 December 29    HONGKONG Standard    

Tom to take bigger stake in outdoor ad firm

Tom Outdoor Media, a wholly owned subsidiary of tom.com, is to increase its acquisition of the equity interest of Chunyu PRC Co from 50 per cent to 70 per cent for 51.4 million yuan (HK$48.5 million).

Tom is consolidating China's outdoor media market through the acquisition of outdoor operators. The Chunyu acquisition was expected to enable Tom to meet its target to become the largest outdoor media operator in the mainland, the company said.

It said Chunyu's bundled products provided synergistic benefits across Tom's cross-media online-offline platform.

The Chunyu acquisition would position Tom for further growth through integration and organic growth. Tom Outdoor Media said increasing the size of the acquisition would give it more operational control of Chunyu.

Around 28 per cent, or 14.6 million yuan, of the consideration would be paid in cash and the remaining 36.8 million yuan would be in the form of 6.3 million consideration shares at an issue price of HK$5.51 per Tom share.

The price per consideration share represented a premium of about 176 per cent to the market price and about 173 per cent to the 10-day average price. Tom would submit an application to the listing committee of the GEM board.

To speed up the acquisition, Chunyu would not be converted to a Sino-foreign joint venture and would, instead, remain a domestic joint venture enterprise as it could take months to obtain approval from the various government departments, the company said.

Chunyu, established in the early 1990s in Qingdao, Shandong, is the city's largest outdoor media company, with outdoor media assets including unipoles and billboards.

Chunyu also has advertising and event-organising businesses.  - HK Standard   23 December 2002  

What happened to Tom's dotcom?
The new-media upstart of Hong Kong tycoon Li Ka-shing has been quietly reinventing itself as a serious old-media player. The goal is domination of China's advertising market

Like other dotcoms, Tom.com is struggling. Since the Internet bubble burst, the Hong Kong start-up - which epitomized Asia's Net mania with its wildly popular stock-market flotation last year - has seen its share price tank and its books covered in red ink. And like many of its new-economy contemporaries, the company is scrambling to produce revenue while distancing itself from dotcom taint. Officials have even dropped the ".com" from the name. On the cover of its 2000 annual report, the company is referred to as simply "Tom."

But this is one sinking start-up that may actually manage to survive and prosper. Tom's biggest shareholder is Hong Kong dealmaker and business whiz Li Ka-shing, Asia's wealthiest man and chairman of conglomerate Hutchison Whampoa. Rather than simply write the company off as another misguided Internet play, the 73-year-old tycoon appears determined to build Tom into something really big: a diversified Chinese-language media company the likes of which Asia has never seen. Says JP Morgan Internet analyst Victor Lai: "Li Ka-shing wants to become the Rupert Murdoch of China."

Tom officials admit only to more modest aspirations, but the company is already busy acquiring old-media assets in Hong Kong, Taiwan and China (see table). Some of the purchases are cheap dotcoms that will be used to enhance the company's website. But there are also magazines, billboard companies and a sporting-events firm. The offline acquisitions appear only vaguely related, yet they have several things in common. One is solid revenues, which have largely eluded Tom's own portal business. Another is that they are established outlets for advertisers. Tom executives say they plan to make similar purchases. The aim is to transform the firm into "a total advertising solution provider" for Greater China, according to CEO Sing Wang. For Li himself, observers note, this could mean he might someday control more Chinese-language media assets than anyone.

MEDIA

Toms Fuzzy Vision

Everyone knows now is not the time to create a media conglomerate, but a loss-making Hong Kong start-up has a fuzzy notion of doing just that. How can Tom Group succeed where global giants have failed? Do not adjust your set: The picture really is unclear

THERE WAS A DEFINITE sense of deja vu in Hong Kong earlier this month. A dotcom start-up made an ambitious acquisition of a venerable media conglomerate. Tom Group, which listed as tom.com just two years ago, announced it would buy a 32% stake in Hong Kongs No.2 broadcaster, Asia Television.

But there was none of the market excitement which met AOLs audacious merger with Time Warner in 2001. This deal elicited yawns and ambivalence. Investors sent Toms stock up 3.8% the day after the merger and down more than 6% the following week.

Toms acquisition comes as the worlds media giants are crashing and burning. Vivendis visionary chief executive, Jean-Marie Messier, was forced out last month after recording the worst-ever loss in French history and AOL Time Warners stock has lost more than half its value this year. "Look at AOL, Viacom, Vivendi," says Kristian Jhamb, a media analyst at JPMorgan Chase in Hong Kong. "They have been the poster boys of convergence and none of these global players have been able to make it work to the extent originally envisaged." Many of these multi-billion-dollar media empires are likely to dismantle, as the sum of their business units is greater than the value that the market has given the whole.

But Hong Kong investors havent yet woken up to the pitfalls of Toms multi-media business model. Theyre lulled by a blind faith in Toms founder, Hong Kong billionaire Li Ka-shing, nicknamed Superman for his ability to spot money-making opportunities. The company, which renamed itself Tom Group to distance itself from its dotcom roots, has continued ploughing money into acquisitions, despite writing off HK$1.1 billion ($141 million) in losses last year.

Toms chief executive, Sing Wang, has bought what amounts to one company for every month he has been in office, completing more than 25 deals and a handful of joint ventures and special partnerships. The cost: HK$3 billion. The company will spend another HK$361 million--its biggest single purchase--on ATV, a second-rate, loss-making TV station.

Wangs aim is to transform Tom into an AOL Time Warner-like media conglomerate in Greater China. But surely, if a global giant like AOL Time Warner cant make money from multi-media in the United States--the worlds biggest advertising market--it will be virtually impossible for little Tom to pull it off in an ill-defined market like Greater China. Despite repeated requests, Tom refused to comment for this story.

Of course, if any market needs consolidation, its Chinas, and if anyone can turn a profit, its Li, who has proven his sceptics wrong many times. The mainlands massive media industry is extremely fragmented with the thousands of publishers and broadcasters controlled piecemeal by local, regional and state government offices. With his guanxi, or influence, and deep pockets, Li could consolidate a chunk of the industry and turn the tables on his critics just as he did with Orange, the British mobile operator he sold at a princely profit.

TOMS HANDS ARE TIED

But it wont be so easy to find willing buyers for Toms assets. "Who would be the buyer?" asks Jhamb. "The universe of prospective China media investors is very limited. And the key gems in a media empire are a mainland print vehicle and a broadcaster--Tom doesnt have that. No one does."

And Tom wont be able to get its hands on an attractive print or broadcast vehicle in China any time soon. With media under tight government control, foreign players like Tom have limited access to the market. Even with its connections, it hasnt been able to make any major inroads into the mainland and has been relegated to buying less-lucrative items like billboards, bus shelters and sports-marketing firms. Its only mass-media deals so far have been in Taiwan, where it snapped up 42 titles that make up 40% of the magazine market, and the ATV purchase in Hong Kong.

Wang has succeeded in transforming Tom from a dotcom into a sprawling media conglomerate with Chinas largest outdoor-advertising network and Taiwans largest magazine empire. But the company remains unprofitable and integration of its new acquisitions is essential to earning healthy returns. At the moment, all its assets--ranging from advertising agencies to a billboard network, a VCD manufacturer and magazines--are run separately, held together only by financial controls.

And none of Toms purchases are worth much individually--they are mostly small players in niche markets. Tom will only be able to increase the value of these companies if it can sell space in bulk to advertisers across its many properties and increase revenues by repackaging its content for all of its other channels.

Media specialists at global giants like AOL Time Warner and Viacom have struggled to make the business model pay. It will be tougher still for Toms management team, who are better known as shrewd deal makers than hands-on operations experts. Wang, for instance, was a private-equity investor at Goldman Sachs before joining the company. "Tom now has a lot of assets, they've built a media franchise," says Vivek Couto, an analyst at Hong Kong-based consultancy Media Partners Asia. "But I'm slightly skeptical about whether they can integrate it all. You've got to have people enshrined in the media business to do that and theres' no one at Tom with that kind of expertise."

For an idea of the difficulties Tom faces in integrating its acquisitions, look at its outdoor-advertising business, considered the gem in its portfolio. In the past year and a half, Tom has cobbled together Chinas largest outdoor network by buying 12 companies with a presence in 22 cities. It controls 5% of the outdoor-ad market in China and reaped HK$130 million in pre-tax profits last year. Chinas outdoor-ad market will grow from $665 million in 2001 to $1 billion in 2004, according to London-based media-buyer Zenith Optimedia.

But unlike its biggest competitor, Clear Media, Tom has failed to combine its new purchases into a market-leading package for advertisers. And while its been distracted by other acquisitions, like ATV, Clear Media looks set to overtake it as the largest outdoor network in China through a merger with a smaller player, MediaNation.

If Tom is having trouble integrating the properties in its outdoor division, how will it combine the offerings of nine different businesses? "There is no convergence between outdoor advertising and DVD factories--zip," says James Mitchell, a media analyst at Goldman Sachs in Hong Kong. Little wonder that cross-media ad sales--the linchpin for Toms growth ambitions--accounted for just 4% of its sales in the last quarter.

To make matters worse, Toms assets are not must-have space for advertisers. Over 80% of total ad spend in China goes to television or publications, like newspapers and magazines, according to Zenith. Tom owns neither on the mainland, so the ATV acquisition could plug the gap by providing a platform for future entry. But the broadcaster isnt nearly popular enough to anchor a Tom advertising package, which could include on-line, billboard and magazine ads.

Toms magazine titles in Taiwan, like Business Weekly and PC Home, are more attractive to advertisers, but it will be difficult to package this publishing portfolio with TV time in Hong Kong and billboards in China. "Its sometimes hard to get clients to separate their budgets--a TV deal over here, an outdoor deal over there," says Blaise d'Sylva, chief executive at Starcom MediaVest Group in North Asia. "Plans arent all done together, especially [across] different markets like Taiwan, China and Hong Kong."

So far, theres no sign that Tom has a clear vision of how to make all of its many pieces fit together.    -  2002 July 25    Far East Economic Review   

INITIAL BACKGROUND on TOM.com

• Cheung Kong owns 19 per cent of Tom.com while Hutchison Whampoa is the largest shareholder with 38 per cent. Pacific Century CyberWorks owns 5 per cent.
• Tom.com  formed a partnership with China Travel Network (CTN) to establish itravel, a mainland travel information and bookings agency site.  Tom.com holds 55 per cent while CTN will hold the remainder. 
• Tom.com launched in February 2000 and was 1,250 times oversubscribed.  Institutions were allocated 90 per cent of shares and the remainder went to local investors.     BNP Paribas Peregrine was Tom.com's global sponsor, HSBC Investment Bank lead underwriter, BOCI, Warburg and Goldman Sachs underwriting managers while CLSA, China Everbright, CASH, CEF, Tai Fook, Worldsec and Dao Heng Bank were underwriters
• Hundreds of thousands of people queued outside banks hoping to cash in on the Internet mania generated by the offer of shares in Li Ka-shing's Tom.com venture.  About 1.5 million applications to buy shares in the company were received, many handed in during chaotic scenes at 10 designated HSBC branches ahead of the noon deadline.   At one point in Mongkok, a queue of 50,000 snaked along Argyle Street, Shanghai Street, Waterloo Road and Portland Street.  In North Point, where 20,000 people submitted forms, part of King's Road was closed. In Tsuen Wan, an estimated 120,000 people submitted applications while 40,000 converged on Kwun Tong and 20,000 on HSBC's Central headquarters.
• Much of the interest in Tom.com was generated by the fact that it is 57 per cent-owned by Cheung Kong (Holdings) and Hutchison Whampoa, which are chaired by Li Ka-Shing.
• Tom.com's US$2bn market capitalisation allows it to make acquisitions  
• A reorganization of the company took place in July 2000 with Sing Wang taking over at the helm as chief executive.  The bulk of the employees are now based in Beijing.
• Tom.com corporate site

ACQUISTIONS  | Selected Press Clippings

Portal-operator Tom.com is set to acquire stakes in a sports portal and an advertising and event management firm for US$50 million, as part of its efforts to build a sustainable revenue base.

The firm yesterday said it has signed memoranda of understanding to buy all existing shares of Shawei, the operator of sports Web site Shawei.com for US$20 million, and 70 per cent of YC Press for US$30 million.

YC Press is a mainland sports advertising and event management firm owned by newspaper publisher Guangdong Yang Cheng Evening Post Group.

Tom.com's new chief executive Sing Wang said the acquisitions are expected to contribute annual revenues of HK$230 million. He did not provide further details.

"This important move is in line with Tom.com's focus of strategically building our portfolio and leadership in the booming China Internet market," Mr Wang said.

Tom.com, controlled by Cheung Kong (Holdings) and Hutchison Whampoa, reported a net loss of HK$194 million on turnover of HK$5.27 million in the six months to June 30.

Pacific Challenge Securities research director Ricky Tam Siu-hing said the acquisitions were positive news.

"Many fund managers have been criticising Tom.com for not doing much after its listing."

Mr Tam said Tom.com's latest move has also added to a trend among Internet firms to acquire or become involved in old-economy businesses in an attempt to secure a more stable revenue base and make their business models look more sustainable.

Financial markets news portal E-finet.com has launched a newspaper to close the gap on becoming a multimedia firm, while Internet ventures investor Pacific Century CyberWorks has acquired traditional telecommunications operator Cable & Wireless HKT to give it a stable cashflow.

Mr Wang did not respond to media queries on the valuation basis, revenues and profit records of YC Press and Shawei. He said the deals would be finalised within the next few weeks.

When asked how Tom.com had been able to circumvent Beijing's restrictions on foreign stake acquisitions in mainland media-related operations, a YC Press spokesman said the agreement was conceived after careful study and consultation and therefore should fulfil any regulatory requirements.

Despite having its operations in the mainland, YC Press was Hong Kong-registered, the spokesman added.

Mr Wang said Tom.com had not finalised payment terms for the acquisitions, which could be a mixture of cash and new shares.

The firm is prohibited from issuing new shares before September 1, the expiry date of its six-month moratorium on the issue of new shares.

With cash of between HK$700 million and HK$800 million, Tom.com is also in talks to acquire Guangzhou-based Web site and Internet service provider 163.net. The deal is estimated to be worth up to HK$500 million.   - 2000  August 14    South China Morning Post

TOM.COM, the Internet portal controlled by tycoon Li Ka-shing, continued its rapid expansion into the mainland's outdoor media business yesterday with the announcement of a 67.3 million yuan ($63.89 million) acquisition of New Star Prosperity Advertising Company, the largest outdoor media advertiser in Dalian.

The company said in a statement it had agreed to purchase a 60 per cent stake in New Star Prosperity in what was its third purchase in the past two months.

Tom.com paid 129.85 million yuan for the other two advertisers.

Under the deal, Tom.com will pay 19.2 million yuan or 28 per cent in cash and settle the remaining 48.53 million yuan by issuing 8.31 million new shares at $5.51 each. Tom.com's acquisition agreement included a profit guarantee from New Star that its 2001 after-tax profit will not be less 8 million yuan.

Should the 2001 earnings of the advertiser fall short by more than 5 per cent, Tom.com would be able to adjust its acquisition price proportionately.

New Star posted an after-tax profit of 3.1 million yuan in the first six months in 2001.

Its core outdoor media assets are unipoles, giant billboards and light boxes, with a total advertising space of more than 8,000 square metres.

With this acquisition, Tom.com will have eight outdoor media companies nationwide.

Its network covers 22 cities, including Beijing, Shanghai, Liaoning and Guangdong. Its total advertising space in China will be over 134,300 square metres.

Sing Wang, chief executive of Tom.com, said more outdoor media acquisitions were likely as the company moved to secure a dominant position in the sector.

``We'll be aggressively identifying profitable companies with quality assets in key mainland cities to expand the nationwide platform further,'' Wang said in a statement.

In February, Tom.com agreed to pay $74 million for a 60 per cent stake in Chinese outdoor advertising company Qilu PRC Co, a further step in its ambitious plan to become the largest outdoor media company in the mainland.

In late January, it paid 51.4 million yuan for a 50 per cent interest in another mainland outdoor advertiser Chunyu PRC Co. Shares of Tom.com closed unchanged at $3.75  - 2002 March 1   i Mail 

INITIAL PRESS RELEASE

Hutchison Whampoa and Cheung Kong form mega portal venture:  TOM.COM

• Targeted at both PRC and Global audiences to “Bring World to China"
• Multi-lingual portal and portfolio of China-related content
• Exclusive arrangements with key People's Republic of China content partners.  

Hutchison Whampoa Limited and Cheung Kong (Holdings) Limited today announced that they will be bringing together their existing and planned internet 'infotainment' content activities under a new holding company

Editor's note :     Tom.com currently achieves ~ 2.5 million page hits per day, primarily from within China.   We advised the Chair of  Tom Group during the initial Start-up in 1999.

 ATV

The deal would make Tom.com the second-largest shareholder of the broadcaster after China-born Liu Changle - chairman of Phoenix Satellite Television and now a citizen of Belize. --AFP

However, most analysts said they would like to think Hutchison would eventually cash out of Vodafone. -   by Sheel Kohl in London & Ben Kwok      South China Morning Post   9 February 2000

Vodafone nears Mannesmann deal

The U.S. firm has formed a 35/65 joint venture with Hutchison and launched the service in Hong Kong in April, and plans to bring the Priceline.com business model to other Asian markets.    - 1 August 2002

BTDCL will focus on hotel services and tourism services in the PRC and the U.S.    -  QuamResearch  July 11, 2002 

INFRASTRUCTURE

CANADA -  17 June 2004 - A consortium headed by Cheung Kong Infrastructure Holdings is one of three shortlisted bidders for the C$600 million (HK$3.41 billion), 100km highway project from Vancouver to the Canadian ski resort of Whistler (above), Cheung Kong Infrastructure said yesterday. A Cheung Kong spokeswoman said the bidding process had not finished and the company had no further comment.

Diversification fuels giants growth
Property developer and global investor in ports, telecommu nications, retail, highways, and technology, Cheung Kong (Holdings) is all that and more. With stakes in businesses worldwide that cover nearly every aspect of daily life, tycoon Li Ka-shings flagship company has few global rivals that match its breadth.

As the parent company of the group, Cheung Kong controls almost half of Hutchison Whampoa. This conglomerate in turn owns about 85 per cent of Cheung Kong Infra structure Holdings (CKI), which has a roughly 39-per cent interest in Hongkong Electric Holdings.

Cheung Kong also has stakes in Growth Enterprise Market-listed CK Life Sciences International, (Holdings) and Tom Group, which will switch to the main board next month. As of the end of June, the groups combined market capitalisation amounted to some HK$500 billion, accounting for about 9 per cent of the total market capitalisation of the Hong Kong stock market.

On the main board, Hutchison was ranked third by market capitalisation in May while Cheung Kong was number nine.

In 2003, Cheung Kong reported a healthy rebound in sales to more than HK$14.33 billion, the highest level since 1994. Property earnings were boosted by contributions from the Rambler Crest residential develop-ment in Tsing Yi, after its completion date was advanced to 2003 from 2004. JP Morgan analysts said this week that consolidation in the property market is likely to continue in the next few months, with prices expected to fall by about 10 per cent as primary sales slow to fewer than 2,000 units a month dur ing the typically lethargic summer season.

JP Morgan added that developers are becoming less aggressive in their pricing of new projects but expects the next major launch to be the third phase of Cheung Kongs Caribbean Coast in Tung Chung. This phase will offer a total of 1,664 units with pre-sales set for mid-July.

OCheung Kong has been the most consistent over the last few yearsO in terms of selling the residential units of completed projects,O Morgan Stanley analyst Robert Hart said. OTheyre like a manufacturer. They sell what they have and this is good for share-holders.O

Improved earnings from the companys China properties also fattened the bottom line last year. Analyst Eva Lee of ING Financial Markets said that, over the next 12 months, Cheung Kong will see stronger sales and rising prices in increasingly affluent neighbouring Chinese cities such as Zhuhai, Shenzhen and Guangzhou.

OThe property market in Shanghai has experienced a big rally in the last two years. As a result, the central government has focused its efforts on controlling prices in Shanghai although, in the long-term, this will also depend on Chinas economic growth," Lee said.

The earnings outlook for the company in 2004 and 2005, however, appears less buoyant. According to estimates by BOCI Research analyst Manfred Ho, Cheung Kongs full-year net profit could fall to about HK$7.64 billion and HK$7.78 billion in the respective two years from more than HK$9.81 billion in 2003.

Ho pointed out that, in 2003, Hutchison accounted for about 60 per cent of Cheung Kongs total asset value and some 73 per cent of its earnings, capping property profits at about one-third of the total. Ho added that he expects losses from Hutchi sons 3G investment to drag down the conglomerates earnings by 54 per cent this year.

A decline in the first half profits of Hutchison subsidiary CKI in 2003 also weighed on Cheung Kong. Interim profits dipped 2.8 per cent year-on- year to about HK$1.4 billion, the first time the company reported negative earnings growth since its listing in July 1996.

CKI is understood to be keen to invest in Australias energy sector because of market transparency and consistent regulations.

It already has interests in power distributors CitiPower, ETSA Utilities and Powercor Australia as well as natural gas player Envestra. Its China energy joint ventures include plants in Liaoning, Henan, Jilin and Guang dong provinces.

The importance of CKIs transportation and infrastructure portfolio will only grow as the company continues to boost its presence in Australia.

Currently, it holds a 50-per cent interest in the A$1-billion Sydney Cross City Tunnel, due for completion in 2006. It also announced this week that it had spent A$239 million to buy a 40-per cent stake in the Lane Cove Tunnel Company, which will build and operate the Lane Cove Tunnel in Sydney for a 30-year period.

Once fully operational, these and other assets will be key to driving sustain able future growth for a company that has long prided itself on its diversification.   - by Dennis Eng    HONG KONG STANDARD       10 July 2004

PHILANTHROPY
Tycoon's $21m gift to 2008 Games
Hong Kong tycoon Li Ka-shing has donated HK$100 million (S$21 million) to Beijing's 2008 Olympics effort.

Mr Li's companies - Cheung Kong, Hutchison Whampoa, Cheung Kong Infrastructure and Hong Kong Electric - have chipped in to build a national swimming stadium that will feature five pools, the Sunday Morning Post reported.

The cheque was handed to the Olympics organising committee chief Liu Qi, who is also the capital's Communist Party boss, by Mr Li's son Victor in Beijing's Great Hall of the People.

Mr Li's gift is half that given last year by another magnate, Hong Kong's Olympics chief Timothy Fok, the report added. - 2004 November 1   AGENCE FRANCE-PRESSE   

Li Ka-Shing : The Global Philanthropist
Business Week article   1 Dec 2003

As Hong Kong's richest man, Li Ka-shing has given away plenty of dough -- and quite a few oranges, too. Through the Li Ka Shing Foundation, Li and his companies have dispensed some $640 million since 1980, footing the bill for projects such as an 18-story building at Hong Kong Polytechnic University and a literacy program in the city. And Li isn't above the sort of grand geste that earns him a bit of good press: During the SARS outbreak last spring, the foundation donated a million fresh oranges to local health-care workers.

Mr Li Ka-shing unveils a plaque to mark the opening of the Hutchison/MRC Research Centre at the Cambridge University.  (Courtesy of MRC)	Mr Li Ka-shing pictured with (left to right) Lord Sainsbury of Turville, Minister for Science and Innovation, the United Kingdom; Sir George Radda, Chief Executive of the Medical Research Council; Sir Alec Broers, Vice Chancellor of the University of Cambridge; and Sir Keith Peters, Regius Professor of Physic, School of Clinical Medicine, Cambridge University   (Courtesy of MRC)

Li's penchant for public giving is something of an anomaly, though. Far more common are lesser tycoons, who give away millions but do little to publicize their generosity. The result is that charitable giving doesn't have the same profile in Hong Kong as in the U.S. -- or the same level of public participation. "In the U.S., there's a whole [philanthropy] industry," says Christine Loh, CEO of Civic Exchange, a local think tank. "Here, there's a lot less transparency and it's not as sophisticated."

That may be changing. Like Li, a handful of charities in the city are getting savvier. Hong Kong Polytechnic this year launched an alumni outreach program to try to boost its funding. The Hong Kong Council of Social Service, which brings together some 300 groups that work with the poor, last year started seminars for members and potential donors. And the local Society for the Prevention of Cruelty to Animals in November created the post of business development director after seeing its donations fall over the past three years. "I need more money in the bank to do the work," says executive director Pauline Taylor.

Why the push to professionalize? With the economy in a funk, big donors have been slowly closing their wallets. Donations to the Community Chest -- an umbrella group for dozens of charities -- have fallen by 25% since 2000. So organizations are hitting the streets more often to raise money directly from the public. The government, which had allowed charities to raise funds from pedestrians only on certain Saturdays, is now permitting such outreach on weekdays. "During bad times, the needs of the unfortunate grow," says Darwin Chan, vice-president for Asia of United Way International and former head of the Community Chest of Hong Kong. "But many companies are now making donations on a more limited scale."

Charities may soon get a further boost from new government initiatives. In most countries, tax breaks encourage giving. But under Hong Kong's flat-tax system, even the wealthiest pony up only 15% of their income. "There's little tax incentive to donate more money," says Joseph Chan, a professor at the University of Hong Kong. To kick-start giving, the government in March announced a program to match donations to local universities, and it has raised the limit of charitable donations taxpayers can deduct from taxable income. Activists also want an amendment to the tax law that would let donors deduct from their taxable income two times the amount they give. If it passes, Li Ka-shing might want to calculate just how much 2 million oranges are worth.    - By Bruce Einhorn in Hong Kong    Business Week Online     1 Dec 2003

Li Ka-shing meets Tony Blair
Scholars of Blair-supported project urged to seize CEPA opportunities

The Chairman of Hutchison Whampoa Limited Mr Li Ka-shing, held a private meeting with British Prime Minister Tony Blair today during the premier's brief stay in Hong Kong. Mr Li was joined by Mr Victor Li, Deputy Chairman of HWL , for the one-hour meeting.

HWL is by far the largest Asian investor in the UK, with interests in projects worth more than Ł10 billion. Hutchison has enjoyed a good track record with its UK investment, and projects ranged across several sectors, employing a total of 23,000 staff. HWL is pioneering the roll-out of 3G services in the UK as the operator of the first mobile multi-media 3G services. The Group owns three container terminals, namely Port of Felixstowe, Harwich International Port and Thamesport, retail chains Superdrug and Savers as well as a number of premium property projects in London.

In a separate meeting held this afternoon, Mr Li met a group of 18 Hong Kong scholars of the Chevening Scholarship Scheme, which was strongly supported by Mr Blair to attract more overseas postgraduate students to Britain to follow courses at British universities and higher education facilities.

Mr Li has urged the Chevening scholars to make good use of their professional knowledge and knowhow and seize each and every opportunity brought about by the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and the Mainland so as to help Hong Kong through the present economic doldrums.

Mr Li through the Hutchison Group has donated a total of Ł2.02 million towards the scholarships over a four-year period beginning last year, which has expanded the scheme to include 63 extra scholarships each year for Hong Kong and Mainland Chinese postgraduate students.

The British Government and Cambridge University are making a matching contribution to the scheme.

About one quarter of these new scholarships are being allotted for studies at Cambridge University, which is a staunch supporter of the scholarship scheme.

Mr Li, a strong believer in continuing education and life-long learning programmes, said he was pleased to see that the Hutchison Chevening Scholarships had supported the further education of high-calibre Hong Kong and Mainland Chinese graduates and business managers.

"I hope that the Hutchison Chevening Scholarships will help them broaden their experiences and I also hope that they will contribute their strength and professional knowledge to society after they have completed their studies in the UK," Mr Li said, adding that he appreciated particularly Cambridge University's active participation.

The Hutchison Chevening Scholarships, an integral part of the Chevening Scholarships Scheme, started last October and will run for four years.   - 2003 July 23   HWL

State-of-the-art cancer research centre opens in Cambridge
Supported by a Ł5.3 million donation from Hutchison Whampoa

A state-of-the-art cancer research centre was officially opened at the Cambridge University by Mr Li Ka-shing, Chairman of Hutchison Whampoa Ltd; and Lord Sainsbury, Minister for Science and Innovation, on 18 May 2002.

Named the Hutchison/MRC Research Centre, the project arises from a collaboration between the Medical Research Council (MRC), the University of Cambridge and Cancer Research UK. Construction of the new building was made possible by a Ł5.3 million donation from Hutchison Whampoa Limited, to match funding from the MRC.

Mr Li Ka-shing said: "We are pleased to be joining force with a world leading University and the Medical Research Council to further the study on cancer. Cancer is now the number one killing disease. Through medical research and practical applications, we hope that we are able to find better cure and prevention of this disease, and therefore benefit all mankind."

Lord Sainsbury, Minister for Science and Innovation, said, "Cancer is one of the biggest killers in this country, and the Government has made tackling the disease one of its central priorities. This centre forms a key part of our drive to strengthen cancer research in the UK, and we greatly appreciate the extremely generous donation of Hutchison Whampoa Ltd to it."

With the opening of the Centre, there are more opportunities to exploit research knowledge for the benefit of cancer patients. The aim of the Centre is to bring basic research in cell biology and genetics toward application for the prevention, diagnosis and treatment of cancer.

Toward this end, the building has been designed to optimize interactions, especially those between medical doctors and basic laboratory researchers. The Centre is built adjacent to Addenbrookes Hospital to enable scientists and clinicians to work closely with patients.

State-of-the-art equipment is also available in core resources, including those for DNA sequencing, molecular cytogenetics and molecular pathology. These facilities allow analysis of tumour cells and tissues to detect gene mutations and changes in chromosomes and cancer markers.       

---

Hong Kong tycoon Li Ka Shing has donated S$19.5m to the Singapore Management University (SMU), the largest donation a Singapore tertiary institution has ever received.

With a 3-to-1 matching grant from the Singapore Government, Mr Li's donation will generate another $58.5 million for SMU.

Dubbed Superman in Hong Kong, the self-made tycoon's rags to riches story has inspired many.

Mr Li, a global entrepreneur, is also no stranger to Singapore.

He has invested widely here and has contributed to various educational causes here.

But Mr Li's latest gift - S$19.5m to SMU - is the biggest donation ever made to a tertiary institution.

He was persuaded to do so by the former Counsel-General to Hong Kong, Mr Chan Heng Wing.

Mr Chan, who is now Ambassador to Thailand, said: "Mr Li is a good friend of Singapore. He knows many of our leaders very well. He also comes down to Singapore very often. I met him for lunch regularly. In the course of these lunches last July, I asked if he has heard of SMU. My intention was to see if Mr Li would lend his name to a building or something like that because he's such a prominent entrepreneur in Asia! At first, he was very reluctant to lend his name. He said 'I'll give some money but I don't want the publicity.' So I'm very pleased that he's agreed to have the library named after him."

$15m of the donation will go towards setting up the SMU library at the new city campus at Bras Basah.

When completed in 2005, the library aims to be the best resource centre in Singapore.

The other $4.5 million will fund scholarships, which will bring up to 8 top scholars a year from China or Hong Kong to SMU, starting next year.

Justin Chiu, executive director of Cheung Kong Holdings, said: "Mr Li himself is very fond of Singapore. (He has respect for all the past and present leaders of Singapore. And) he thinks Singapore is a good country providing good legal system, Singapore has the free flow of foreign currencies and Singapore has provided enough talents for the business community to develop their business."

The private university is elated that SMU has caught Mr Li's attention.

Ho Kwon Ping, chairman of SMU Board of Trustees, said tongue-in-cheek: "The fact that someone, a global entrepreneur like Mr Li Ka Shing has chosen SMU, we'd like to think that he's got a good eye for talent and quality in everything that he does, and that we fit in very well with his vision of entrepreneurship, and his ideas of innovation and creativity which he does everywhere else."

"And he's spotted a winner!" added a smiling Mr Ho    -  Yahoo!      10 Sept 2002       

Li Ka-shing sponsors overseas study tours

Tycoon Li Ka-shing is sponsoring 1,000 secondary students for overseas study of environmental protection and technology.

The Li Ka-shing Foundation announced it would donate $7 million to finance Millennium Study Tours.  Each secondary school is expected to be allocated two places.

The students - split into groups - will visit projects dealing with environmental protection and new technology, a foundation spokesman said.

Students with outstanding academic records and social skills will be selected to join the trips to the mainland, Southeast Asia, Europe, the United States and Australia.

Fifty teachers will be selected as chaperones.

Details of the trips, which are supported by the Education Department, will be announced next month.

Mr Li, who heads Cheung Kong (Holdings) and Hutchison Whampoa, has donated nearly $3 billion to various causes over the years.

The Li Ka-shing Foundation was set up in 1980 to promote the development of education, health care and social welfare in Hong Kong, the mainland and overseas. - by Antoine So      South China Morning Post    

Hong Kong companies gave a big boost to Beijing's preparations for the 2008 Olympics with Hutchison Whampoa signing up for a US$150 million tourism joint venture and Kerry Properties agreeing to back a plan to develop the capital as a logistics hub.

At a signing ceremony in a Beijing Hotel on the second day of the fifth Beijing-Hong Kong Economic Co-operation Forum, Beijing officials announced they had secured 30 agreements involving as much as US$1.3 billion.

The biggest deal signed brings together Hutchison, the city's flagship company, Beijing Enterprises Holdings and a Beijing-based travel services firm in setting up a company with a registered capital of US$100 million to develop travel-related businesses, in particular hotels and developing tourist attractions.    - 2002     South China Morning Post     

Billionaire sings praises of economies Old and New
'You still need people to produce oil and gas'

Winnipeg -- Hong Kong billionaire Li Ka-shing said yesterday that the Old Economy is alive and well -- and so is he.

Many companies operating in the Old Economy, including Canadian resource firms, will thrive because of technological innovations, Mr. Li said during a rare public appearance in Canada.

Mr. Li, chairman of Hong Kong-based Cheung Kong (Holdings) Ltd., founded the company almost 50 years ago as a maker of plastic toys. He built it into a flagship conglomerate with investments today ranging from property development and container ports to telecommunications and e-commerce.

"We have Old Economy, we have New Economy," said Mr. Li, who turns 72 next week.

Even with the rise of the Internet, "you still need people to produce oil and gas. . . . The New Economy is like a new tool -- it creates lots of additional benefits."

While acknowledging that business opportunities presented by the New and Old economies make him wish he was 20 years old again, a smiling Mr. Li said he's in good health and rejected speculation that he would be undergoing a heart bypass operation.

Mr. Li, one of Asia's most powerful and influential businessmen, dismissed recent media reports in Hong Kong that said heart troubles had forced him to seek hospital treatment on the weekend.

"That's our Hong Kong press. Many times they just make [up] a story and make it more attractive and can sell more copies," he said during a visit to Winnipeg, where he received the International Distinguished Entrepreneur Award (IDEA) from associates of the University of Manitoba's Faculty of Management.

"My only problem? I cannot play golf for the coming one month. I twisted and hurt my left knee. That is the true story."

Previous winners of the IDEA honour, which has been presented annually since 1983, include Sony Corp. co-founder Akio Morita of Japan, U.S. businessman Ross Perot and Winnipeg entrepreneurs Izzy Asper and Albert Cohen.

Mr. Li is also chairman of Hong Kong-based Hutchison Whampoa Ltd., a company whose major shareholder is the Li family.

Calgary-based Husky Oil Ltd. is 49 per cent owned by Hutchison, while the Li family owns 46 per cent and Canadian Imperial Bank of Commerce holds 5 per cent.

Mr. Li's eldest son, Victor, is co-chairman of Husky and used to spend much of his time in Vancouver in the early 1990s. Another son, Richard, formerly worked as an investment banker in Toronto.

Both sons play key roles in the Li family's global business empire. Victor is Cheung Kong's managing director and deputy chairman and Richard heads up the high-tech Pacific Century Group and serves as Hutchison's deputy chairman.

Li Ka-shing's rags-to-riches story has earned him the nickname "Superman" among Asia's business elite.

At age 12, Mr. Li fled China after the Japanese occupation, forcing him into what was then the British colony of Hong Kong.

He said yesterday that he's pleased to be honoured in Canada. He said he hopes that all entrepreneurs will remember to balance the demands of work with social and philanthropic obligations.   - 2000 June 7     by Brent Jang    The Globe and Mail

Asia's Canadian connection
Albert Cohen was an early believer in Japan's Sony Corp.

The University of Manitoba is going to honour Li Ka-shing, Hong Kong's richest tycoon, next year as its International Entrepreneur of the Year award recipient.

This is news. And it is notable because Mr. Li, a reclusive billionaire, routinely turns down any honours anywhere.

But his acceptance is entirely due to Albert Cohen of Gendis Corp. in Winnipeg. Self-effacing and disarmingly friendly, Mr. Cohen is one of Canada's most well-respected businessmen in Asia due to the fact he was an early backer and close friend of the late Akio Morita, co-founder of Sony.

I found out about Mr. Li's acceptance when I called up Mr. Cohen last week to discuss Morita's recent death just two weeks ago.

"I feel it's a real personal loss and it was a unique relationship we had," he said. "I visited with him in Hawaii last year and the year before. He had a stroke and was immobile. He couldn't use his facilities and couldn't speak. It was a very sad circumstance but we were friends and I was glad I visited."

 

Cohen is one of six sons who grew up poor in Winnipeg. The six parlayed the family's small retail operation into a highly profitable national wholesale jobber, thanks to importing innovative products such as the world's first ballpoint pens.

 

Chief "buyer" was Albert Cohen who first tracked down Mr. Morita and his co-founder, Masaru Ibuka, in 1955 while on his honeymoon in Japan. Sony had come out with one of the world's first transistor radios and Mr. Cohen had spotted these clumsy contraptions and realized their marketability. He hunted down the two and found them in a dilapidated factory outside Tokyo.

He signed the company's first export deal and Mr. Morita later said that export contract to Canada saved his outfit from impending bankruptcy. Sony was about to be victim to the large Japanese trading companies who bought innovations by shutting them out of the retail outlets they controlled.

Then along came the friendly Canadian. Besides providing badly needed cash flow, Mr. Cohen's purchases revealed other strategies which had not dawned on Morita and Ibuka.

 

"I have always believed in what I called the Triangle of Success. I didn't want the cheapest product, I wanted the best. This was unique for an importer to say to the Japanese at the time because they had a reputation for second-rate exports. Morita understood what I was saying. The apex of the triangle is quality. The other sides are distribution and advertising and I had both to offer him. Without all three you cannot be successful, I told him," said Mr. Cohen.

 

Three years later, Morita began marketing Sony worldwide after the "pilot project" with Gendis in Canada had proven successful.

 

For 40 years the two men did land-office business together. Then in 1975, Sony and Gendis entered into a unique joint venture, the only one of its kind in the world, with Sony giving Gendis control or 51% of the action for 20 years. The deal ended by mutual consent in 1995 with Sony paying Gendis $207-million for its 51%.

 

Along the way, Gendis benefitted from the association and built a conglomerate based on its success in selling Sony products, acquiring other retail and natural resource assets. The partnership ended at Gendis' request because the nature of Sony's business was changing and the Tokyo inner circle, namely Morita and Ibuka, were gone. Ibuka died three years ago.

 

The story of Cohen and Morita underscores the fact that so much of Asian business is "relationships business" or agreements reached by handshake between persons who are also friends. In the West, business is more transactional and even enemies can mutually profit from deals struck together.

 

That's why Mr. Cohen's reputation precedes him in Asia where he is known as Morita's good Canadian friend, thus Li Ka-shing's agreement to receive the award.

 

I also benefited from the power of Cohen's reputation. I remember asking Mr. Cohen if he could request an interview for me with Morita in Japan in 1993. At the time, I had made similar requests for prominent people in Japan through the Japanese government's foreign press office and had been disappointed because the officials had given me appointments with only third- or fourth-tier officials and businessmen.

But after Cohen faxed Morita with a request for an interview, Morita agreed within an hour or so. When I informed the foreign press office in Tokyo I had an interview with Morita, they faxed back a completely revised and upgraded, schedule of interviews in "recognition" of my higher-than-assumed status. Obviously, it was second-hand status, thanks to Albert Cohen's relationship with Morita.

"Morita had integrity and was honest about everything. He was an exceptional and talented man," recalls Mr. Cohen."I will miss him."  -  1999 October 19    by Diane Francis     Financial Post       

CANADA

Li faces C$4b Air Canada call
Victor Li's Trinity Time Investments may need to inject C$4 billion (HK$23.76 billion) into Air Canada as part of the agreement to acquire the financially troubled airline.

It was a ``critical'' condition of the agreement that the airline must order as many as 105 new mid-sized planes by the end of January, Canadian Press said, citing bankruptcy court documents.

Some stakeholders planned to argue that the court should at least consider the Cerberus bid when Air Canada asks Justice James Farley to approve Trinity's deal early next month, the paper said.    - Hong Kong Standard       29 November 2003

Mulroney part of Air Canada bid
Former prime minister stands to be made airline's chairman if plan succeeds
 
Paul Vieira, with files from Barry Critchley
National Post - Friday, November 28, 2003

Brian Mulroney, Canada's former prime minister, is helping to orchestrate an attempt by a Wall Street hedge fund to reopen the bidding process for Air Canada -- and stands to be made chairman of the airline if he succeeds, sources have told the National Post.

Mr. Mulroney is senior legal advisor to Cerberus Capital Management, which lost out earlier this month to Victor Li, the Hong Kong businessman, to become the insolvent airline's new equity sponsor. Sources, who did not want to be named for this story, say the former Tory leader has played a role in helping Cerberus launch a revised, but unsolicited and controversial, offer for the airline, and is lobbying Air Canada executives to get them to reconsider.

A copy of Cerberus's initial bid for the airline, obtained by the Post, indicated the fund had slated Mr. Mulroney to be one of 12 directors on a revamped board. Sources say Mr. Mulroney would, in fact, be named chairman of the airline he privatized as prime minister in 1989 -- which saw Ottawa collect roughly $492-million for its shares.

"If Cerberus wins, Mulroney is the new chairman of Air Canada. Cerberus has already said that," a source close to the restructuring said.

"Mulroney has made personal calls to Air Canada board members and Air Canada management on this issue. He's up to his ears on this," said another source, who has ties to the Montreal business community.

Mr. Mulroney was not at his Montreal law office yesterday and did not return a phone call.

Cerberus, named after the monstrous three-headed canine that guarded the entrance to Hades in Greek mythology, retained Mr. Mulroney's law firm Ogilvy Renault to act as its legal advisor during the fund's attempt to become Air Canada's equity sponsor.

The airline began a search for an investor last July in order to find a party willing to inject at least $700-million to help the insolvent airline exit bankruptcy protection, which it filed for last April 1.

Air Canada narrowed its list of equity partner finalists to Cerberus and Mr. Li, who holds Canadian citizenship and is the son of Li Ka-shing -- the Hong Kong industrialist and one of the world's wealthiest individuals.

On Nov. 8, the airline's board of directors, in what sources say was a unanimous vote, opted for Mr. Li's Trinity Time Investments, which agreed to put up $650-million for a 31% stake.

The board voted in unison even though Mr. Mulroney, sources say, tried to lobby directors with whom he has close ties.

"He leaned on them -- but despite that leaning, the board still saw the math and said, 'No, Li is a better candidate,' " the restructuring source said.

Among the board members Mr. Mulroney targeted, sources indicate, are: Raymond Cyr, former chairman and chief executive of BCE Inc., Bell Canada's holding company; David Angus, a Montreal lawyer and former head of the main Progressive Conservative fundraising organization; and Fernand Lalonde, a one-time political strategist for Robert Bourassa, the late Quebec Liberal premier.

Air Canada's court-appointed monitor, Ernst & Young, said in a report filed this week neither Mr. Li nor Cerberus "expressed any concerns" the investor search was proceeding in a manner that was "unfair to them or which deprived them of a fair opportunity to make their best proposal."

But in court documents filed by Air Canada this week, Cerberus informed the Montreal company it failed to put forth its best offer and wanted to try again. It submitted two revised offers that appear to be richer than Mr. Li's. More specifically, some of Air Canada's creditors, owed between $8-billion and $10-billion, have voiced support for the revised bid because it gives them a better chance to recoup more of their money.

Air Canada has refused to consider the Cerberus offer, saying that doing so would violate the agreement with Mr. Li.

It has applied for court approval of the Trinity agreement, which is required by Dec. 20 as a condition of the deal.

The Cerberus offer, while welcomed by some Air Canada debtholders, has earned scorn from some senior financiers on Bay Street, saying it demonstrates bad faith on the hedge fund's part after it participated in what was described by the court-appointed monitor as a fair, transparent process.

"If they reopen the bidding process, the precedent that would be set for any auction process would be astounding," said a Bay Street executive, who has no ties in the Air Canada restructuring. "Why would anyone put their best foot forward in an auction? They would just throw in a bid after the fact."

Cerberus, whose representatives did not return phone calls, manages close to US$10-billion in assets and is known as a turnaround artist that buys distressed assets, oversees their restructuring and sells them years later at a healthy profit.

But it has done so by rubbing many people the wrong way.

A senior banking executive said: "Look at what Cerberus does at every process they get into. They hold it hostage so they can squeeze out some type of payment for themselves -- with no commitment to building any value at all."

The executive, who requested anonymity, said Cerberus's unsolicited bid is nothing more than "sour grapes" on the fund's part.

Cerberus rebuffed Li's equity offer
Gesture by winning Air Canada bidder was refused due to holding period: sources
 
Paul Vieira and Barry Critchley - Financial Post
Friday, November 28, 2003

Shortly after he won the bidding process for Air Canada, Victor Li offered the loser, Cerberus Capital Management, a chunk of his stake -- only to be turned down because the hedge fund would be prohibited from selling the equity for at least 18 months, the Financial Post has learned.

It's the latest revelation to emerge about Cerberus and its attempt to reopen the bidding process for the insolvent airline, after losing out to Mr. Li's Trinity Time Investments group.

Documents detailing Cerberus's initial bid, dated Sept. 25, revealed the fund: offered to pay $500-million for a 22.2% economic interest and underwrite a rights offering of another $500-million; would install Brian Mulroney, the former prime minister, as a director on a revamped board; intended to sell Air Canada subsidiaries -- notably Aeroplan, the frequent-flyer program; Jazz, the regional carrier; and aircraft maintenance arm -- in an effort to "optimize shareholder value;" and asked that regional jets be operated by pilots at Jazz, who earn less than their counterparts at the mainline carrier.

Mr. Li's gesture toward Cerberus was made at a meeting convened by Air Canada, after the fund notified the airline it was unhappy with the result of the four-month equity solicitation process and planned to launch a counteroffer, sources said.

Mr. Li, son of Hong Kong industrialist Li Ka-shing, was selected on Nov. 8 by Air Canada's board, by agreeing to take on a 31% stake in exchange for $650-million.

Sources familiar with the meeting, held days after the board's decision, say Mr. Li offered less than a third of his stake to Cerberus as a gesture of goodwill. The only condition was that Cerberus would be banned from trading the stock for 18 months.

Cerberus, in turn, said it would entertain the offer only if the trading ban were cut to six months. That counteroffer was rejected.

Calls to Cerberus representatives yesterday were not returned.

The information provided by independent sources add details to the latest report from Air Canada's court-appointed monitor, Ernst & Young. The monitor said a meeting took place between representatives for Air Canada, Mr. Li, Deutsche Bank (which is slated to underwrite a $450-million rights offering under the Trinity offer) and Cerberus. The topic was the hedge fund's participation in the offering, which gives creditors a chance to buy stock in the restructured airline on the same terms as Mr. Li.

The monitor said following initial discussions, Cerberus warned it would submit a revised offer for Air Canada unless talks resulted in it "receiving a participating interest."

The hedge fund, named after the three-headed dog that guarded Hades in Greek mythology, has since tabled two revised bids it wants Air Canada to consider: one that sees it invest $650-million for a 27% stake and another that gives Cerberus 11.9% of the airline for $250-million, as well as a guarantee to backstop a $850-million rights offering.

The airline, however, has refused to consider the reworked deals, saying doing so would violate terms of the Li agreement. Instead, it has opted to get court approval of Mr. Li's deal.

In court documents filed this week by Air Canada, it was revealed Cerberus told the airline it failed to produce its best offer during the final stages of the bidding process and was willing to be more "flexible" in producing a new bid.

Details of an early Cerberus offer -- which valued Air Canada at $2.25-billion -- indicate the hedge fund was willing to invest $500-million in Air Canada for a 22.2% economic interest, and underwrite a $500-million rights offering. The fund said its investment structure complied with federal laws governing foreign ownership of airlines, limited to 25%. It also said Cerberus expected Air Canada to work with it in persuading regulators to boost the limit.

Sources indicate Air Canada's directors were uncomfortable with Cerberus's proposed ownership structure, saying it would likely fail a "gut check" test with regulators. Moreover, the structure is said to have copied heavily from the Canadian Airlines model, which saw American Airlines hold a 33% economic control but a 25% voting interest in the distressed carrier. But American was able to install its own personnel in key positions, giving the U.S. carrier de facto control.

"[The regulators] are not going to let that happen again," said an insider familiar with airline regulation. "They were not happy with what happened at Canadian Airlines."

Mr. Li's bid was endorsed in part because he holds Canadian citizenship, making his bid cleaner.

One of the people the fund is looking to for guidance on foreign ownership is Mr. Mulroney, the former Tory prime minister. He is the senior legal advisor to Cerberus, but is to become Air Canada's chairman of the board if the fund is successful in its bid for the airline. He was listed as one of four directors Cerberus planned to appoint to a revamped, 12-member board.

Another key element of the Cerberus plan was to split up the company and sell off prized subsidiaries six to 18 months after the deal closed. It identified Aeroplan, Jazz, and the aircraft maintenance and cargo handling units as items to be put up for sale. "Each of these businesses presents significant organic or third-party growth opportunities and/or are capable of being monetized through a capital market transaction," the offer said.

Earlier this year, Onex Corp. and Air Canada reached a deal on Aeroplan, which would have seen the buyout firm acquire 35% of the frequent-flyer plan for $235-million. That deal, however, fell through after the airline filed for creditor protection.

But a potential sticking point in the initial Cerberus offer was a requirement that regional jets be operated by pilots from the regional carrier, Jazz. Those pilots earn less money than their mainline counterparts and would result in significant costs savings, hence increasing potential profits for Cerberus.

However, this would likely spark labour fury with the Air Canada Pilots Association, the union that represents mainline pilots. Air Canada was almost forced into liquidation last May when the airline and the union were at odds over a new collective agreement on this very issue. A deal, struck at the last minute, was reached but only after the union agreed to allow an arbitrator to decide which set of pilots could fly the regional jets.

Also contained in the initial offer document was a request by Cerberus for a $15-million "commitment" fee for closing the deal.

Mr. Li's agreement calls for a similar kind of payment, only he is scheduled to get $6.5-million.


Air Canada sets date for court
Will ask for approval on Trinity deal and direction on rival bid from Cerberus

By Keith McArthur - From Friday's Globe and Mail

Air Canada will head to court in 10 days to ask Mr. Justice James Farley of the Ontario Superior Court to approve a controversial equity deal with Trinity Time Investments Inc., a company controlled by Hong Kong businessman Victor Li.

Time has been set aside for Dec. 8 or 9 for the court to consider the motion, as well as questions about what to do with a rival, unsolicited bid from New York-based Cerberus Capital Management LP that was received after the end of the equity solicitation process.

Legal observers predict that Judge Farley, the judge overseeing Air Canada's restructuring, will be reluctant to reject the Trinity deal -- unless he can be persuaded that the process was unfair.

It is believed that Cerberus lawyers will suggest that the process, by definition, was flawed because it did not bring out the best bids.

Several large creditors are expected to argue that Judge Farley should select the deal that is best for creditors -- even if it came after the end of the formal process.

But lawyers for Air Canada and Trinity will say the court must respect the process and endorse the Trinity bid.

They will argue that the court can respect the process and still protect the interests of creditors.

That's because Trinity's deal with Air Canada contains specific procedures about how to handle a richer bid. The deal allows Air Canada to consider bids that are better for creditors if ordered to do so by the courts.

In theory, Trinity would have the chance to sweeten its bid -- or allow Air Canada to sign a deal with a rival bidder and settle for a break fee of $19.5-million.

Lawyers supporting the Trinity bid will argue that the court must take its opportunity to approve a sure thing. After all, Trinity can walk away from the deal if it doesn't get court approval by Dec. 20.

Sources close to Trinity say they would not even consider improving their bid unless the current one is first approved by the courts.

Financial creditors believe they will get significantly better recovery under the Cerberus bid because it grants them rights to buy up to $850-million in Air Canada shares at favourable rates, compared with $450-million worth of rights under the Trinity bid.

Some of the creditors -- especially the large financial institutions with the wherewithal to buy new shares -- are planning to go to court to challenge the Trinity deal and urge court to consider the Cerberus bid.

On Nov. 8, Air Canada chose Trinity Time over Cerberus as its equity sponsor.

Two weeks later, Cerberus fought back with two separate unsolicited offers.

The airline does not consider those offers to be binding, but it is believed that Cerberus will submit a detailed binding offer to Ernst & Young Inc., the airline's court-appointed monitor, as early as today.

Cerberus believed it did not have the chance to submit its best bid, according to a report by the monitor. The airline's unions are expected to ask the court to see copies of the Cerberus proposals so they can make a determination about which is the stronger bid.

"If we find one's better than the other, we're not scared of taking a position, but so far they both look the same," said Gary Fane, director of transportation for the Canadian Auto Workers union.

Air Canada's chief financial officer Rob Peterson has already sworn an affidavit stating that the process has been "fair, open, transparent and, above all, highly successful."

The airline may also make the case that it wants an equity sponsor that can be a driving force in the airline's future, rather than just an investor who will guarantee a rights offering.

Airline officials have suggested that if Air Canada wanted to do a rights offering, it could have done that through any number of major financial institutions, instead of with Cerberus.      - 28 Nov 2003

However, one aspect of Mr Li's proposal had angered Air Canada's unions. It provides for chief executive Robert Milton and chief restructuring officer Calin Rovinescu to each receive 1 per cent of the new equity in stages over four years.        By Ken Warn in Toronto    Financial Times Nov 22, 2003

AIR CANADA BOARD OF DIRECTORS SELECTS VICTOR T.K. LI FOR INVESTMENT OF $650 MILLION AS EQUITY PLAN SPONSOR

TOTAL NEW EQUITY OF $1.1 BILLION TO BE RAISED INCLUDING $450 MILLION RIGHTS OFFERING

Air Canada's Board of Directors at a meeting today selected Trinity Time Investments, controlled by Victor T.K. Li, from the two equity plan sponsor finalists. The Agreement contemplates a $650 million equity investment, which will represent approximately 31% of the common equity in a restructured Air Canada.

As previously announced, rights will be offered to all creditors of Air Canada to acquire new shares on the same economic terms as Trinity. The Rights Offering, in an amount of $450 million, will close contemporaneously with the Trinity Investment and will be underwritten by Deutsche Bank as standby purchaser. Rights not purchased by creditors will be purchased by Deutsche Bank at a premium determined in accordance with a formula not to exceed 15%, to benefit non-exercising creditors.

Between the Trinity Investment and the Rights Offering, an additional $100 million is being raised over the previously announced $1 billion which would avoid having to issue certain convertible debt instruments on emergence.

The Agreement contemplates that creditors with aggregate claims of $8-$10 billion will receive approximately 56% of the common equity, after taking into account the Rights Offering. Existing shareholders of Air Canada will receive in the aggregate a nominal .01% stake.

“I am extremely pleased that we received two firm investment commitments from leading international investors at this difficult time in the history of the airline industry," said Robert Milton, President & Chief Executive Officer of Air Canada. " Both offers valued the company in a similar fashion and both supported the company’s restructuring business plan and its management. Given the success of Victor Li in his global business endeavors, we look forward to the opportunity to benefit from his participation in fully realizing Air Canada’s true potential.”

“We are very excited to have been selected as equity plan sponsor to work with Air Canada to complete its restructuring," said Frank J. Sixt, speaking on behalf of Mr. Li and Trinity." We believe Air Canada is a solid platform and can successfully emerge from the current process as an industry leader in terms of service standards as well as in terms of profitability and growth. We have full confidence in the company's senior management team, and will continue to work with them over the coming months to complete the steps which will reshape Air Canada into a leading competitor in the air transportation sector globally."
The Agreement is subject to a number of conditions including: (i) satisfactory resolution of the funding of the pension deficit; (ii) the obtaining of regulatory approvals and understandings; (iii) the entering into of satisfactory agreements to acquire and finance the 70-110 seat aircraft acquisition program; (iv) approval of the Plan by Creditors and the Court; and, (v) the absence of various facts and events that would depreciate equity value. The Agreement provides for a closing date of no later than April 30, 2004.
Under the Agreement, Air Canada’s Board upon emergence will consist of 11 members of whom five will be designated by Trinity, two by Deutsche Bank, two members of management and two others by a selection committee which will include a representative of creditors.

Upon closing, base salary and bonus programs for continuing executives is to be no higher than currently in effect. A management stock option program will be established of up to 5% of total issued and outstanding shares, of which no more than 3% shall be issued on emergence at an exercise price equal to Trinity’s buy-in price. As was the case in both offers, so as to ensure the continued long term commitment of Robert Milton, President and CEO and Calin Rovinescu, Executive Vice President to implement Air Canada’s Business Plan, Trinity will provide these senior officers from its own holdings with 1% each of new equity vesting in stages over four years. This ownership interest will come from Trinity’s equity stake following emergence.

Trinity has required various transaction protection provisions. Air Canada has agreed not to solicit any competing proposals for an equity plan sponsor. Under certain circumstances up to $19.5 million may be payable as a “break fee”. In addition, Air Canada has agreed to pay Trinity certain closing fees and to reimburse Trinity for certain expenses until closing.
Air Canada anticipates seeking Court approval for the Agreement and for the Rights Offering and will seek Court direction for convening the requisite meeting of stakeholders in the near future. Periodic reports as to this process will be provided in the ordinary course.

The Investment will be funded from Mr. Li's personal financial resources and may include investment from other family holdings and foundations and is not subject to financing conditions. Mr. Victor T.K. Li, a Canadian citizen, is the Deputy Chairman of Cheung Kong (Holdings) Limited. Mr. Li and his family hold controlling interests in Cheung Kong as well as such other widely held companies as Hutchison Whampoa Limited, Hongkong Electric Holdings Limited and Husky Energy Inc. of Calgary. The Cheung Kong Group's businesses encompass such diverse areas as property development and investment, real estate agency and estate management, hotels, telecommunications and e-commerce, finance and investment, retail and manufacturing, ports and related services, energy, infrastructure projects and materials, media, and biotechnology. The Cheung Kong Group ranks among the top 100 corporations in the world, with businesses in close to 40 countries and over 165,000 employees.

Air Canada is proceeding with other components of its restructuring concurrent with the final stage of the equity sponsorship process and will continue to report progress from time to time.  - Employee Bulletin

Hong Kong Family Helps Air Canada Rescue

Saturday's agreement, which must close by April 30, 2004, is subject to a number of conditions, including resolving the funding of Air Canada's C$1.5 billion pension deficit, obtaining regulatory approvals and reaching an agreement to finance the acquisition of new 70- to 100-seat aircraft, Air Canada said.         -    Reuters   10 Nov 2003

Li sticks to family script with Air Canada stake

The relationship with China, fostered by Li Ka-shing, could pay off for Air Canada with new routes in the burgeoning and potentially huge travel market, Erickson said.  -  Reuters     10 Nov 2003

The stock hit a low of 69 Canadian cents soon after the airline filed for bankruptcy.   - Reuters   10 Nov 2003

Air Canada taps Hong Kong's Victor Li for equity

The union wants Air Canada to pay down the pension plan deficit faster over the 10-year period than the airline agreed to with Canadian regulators. Union leaders are to meet mid-week to discuss strategy on the pension talks.   - Reuters      9 Nov 2003

Li Family's Air Canada Bid Fits Its Taste for Distressed Assets

``The first six to nine months out of a restructuring is the only time anyone has ever made any money as an equity investor in the airline industry,'' said Barry Allan, a founding partner of Marret Asset Management Inc. who oversees some Air Canada bonds. ``You'd be crazy to keep it as a core holding.''   - Bloomberg     10 Oct 2003

Editors' note:   Victor Li walked away from this deal in April 2004.

Points to note here:

• To succeed in Deal Making  with this group, takes serious discipline, skills and sense of timing.   Our cross-cultural business skills are exceptional, and we are used to dealing in larger multiples.
• Footnote 1.  - Superman Li has been displaced as three in India now richest in Asia
• Selling interest in Sydney Tunnel