Chapter 654: Hutchison Whampoa is heavily in debt

Chapter 654: Hutchison Whampoa is heavily in debt

Chapter 654: Hutchison Whampoa is heavily in debt
At noon that day, at the headquarters of Hong Kong Electric Group, all management gathered for a closed-door meeting. A few hours later, Hong Kong Electric's boss Wells secretly went to the headquarters of Hutchison Whampoa and met with Qi Dezun.

"Mr. Qi Dezun, our management at HK Electric very much welcomes your investment. However, we still hope that HK Electric will maintain its previous operating model and there will not be any major changes." Although Wells spoke very politely, there was a hint of arrogance in his tone.

Qi Dezun naturally understood what he meant. Although he was unhappy, he smiled and said, "Mr. Wells, my purpose of investing in HK Electric is just to see its future, and I will not seek any impact on its operations.

Huang and I have acquired many companies over the years, many of which are independently operated. The more famous ones, such as Harbour Engineering and Anderson Industries, are just registered under Huang and I. None of the original management has changed. "

Hutchison has acquired many companies over the years, both large and small, including several listed companies. He has met many people and can tell what many people think at a glance.

The original controlling families or management of many companies naturally do not want outside parties to participate in the management of their company. Even if you invest, just be a shareholder.

Qi Dezun would agree to these requests in many cases. The first reason was to make a quick acquisition. Otherwise, if the other party disagreed, you would either have a hostile takeover or a battle of wits and courage with the other party at the board of directors or shareholders' meeting. This might be very unprofitable. Moreover, many companies have strong business independence, and Qi Dezun's trusted subordinates have no experience in this area.

Therefore, for many companies under Hutchison Whampoa, Qi Dezun only wants nominal control, but actually lets the original team manage them. This will also facilitate his future acquisition of other companies. Just like now, he can use this as an example to convince the management of HK Electric to cooperate with him.

Wells knew some things about Hutchison Whampoa and had done some research before. He was quite satisfied with Qi Dezun's answer, but he still said, "Mr. Qi Dezun, it is not a problem for Hutchison Whampoa to become a shareholder of HK Electric, but HK Electric will not belong to any other company. I hope you can understand this."

As one of the top ten listed companies in Hong Kong, Wells is a big boss. Even if he does not have many shares, he still has a high status in the Hong Kong business community.

Once HK Electric becomes part of the Hutchison Group, even in name only, how will it be able to stand on equal footing with the bigwigs of companies like Jardine Matheson, Swire, Wheelock and China Light and Power?

Other management of HK Electric will not accept such a thing.

Qi Dezun's face changed slightly, but after thinking for a moment, he agreed and said, "That's fine, but I need to obtain the corresponding board seat in accordance with the laws of Hong Kong listed companies."

If it is announced to the outside world that HK Electric belongs to Hutchison Whampoa, many shareholders who are unaware of the truth will inevitably chase after Hutchison Whampoa's shares. This is one of the important purposes of his acquisition of HK Electric.

But at the moment he didn't want to fall out with the management of HK Electric, as this would be detrimental to his plans, so he could only agree to it first and talk about future matters later. It was just a verbal agreement anyway, and there could be no written document for such a thing.

"Mr. Qi Dezun, didn't you just say that you would not participate in the management of HK Electric?" Wells said with an unhappy look on his face.

No matter how powerful the management of HK Electric is and how much control it has over the company, from a legal perspective, the highest representatives of company rights are the general meeting of shareholders and the board of directors. HK Electric's shareholders are very idle, and there will be no unity even if a general meeting of shareholders is held. However, there are only a few people on the board of directors, and everyone has strong voting rights. Even the bigwigs of HSBC are sometimes subject to the control of the board of directors.

Qi Dezun smiled and said, "As a major shareholder, I must have the right to supervise the finances, right? With a board seat, I can also understand the company's financial situation."

Wells said: "The major shareholder naturally has this right. How about this, Hutchison can arrange for someone to enter the financial department of Hong Kong Electric, is that okay?"

If an outsider acquires most of the shares, it is impossible to expect the other party to give up everything. Although finance is important, the major shareholder also has the right to investigate finance, so it is normal to give a financial position, which is much better than a board seat.

Qi Dezun shook his head and said, “Let’s not talk about the financial aspect first. I still think that there are problems with the current operation of HK Electric. The power generation business is very professional, and HK Electric also meets the needs of Hong Kong Island. I will not comment on it;

But today, the most profitable business in Hong Kong is not water, electricity and gas, but real estate business. You are also aware of this. As a century-old company in Hong Kong, HK Electric owns a large amount of prime land in Hong Kong Island, but it does not develop it. Instead, it allows these wastelands to go to waste or just builds some small houses to collect rent. Isn't this a waste of resources?
So I hope that Hutchison can develop these lands together with HK Electric, so that HK Electric can also make more money than the power generation business. "

"Cooperate in developing real estate business?" After listening, Wells was silent for a moment and said, "It sounds good. In fact, we have this idea ourselves, but we have no experience in this area, so we have been hesitant."

Although British giants have seen that Chinese companies are making a lot of money through real estate business, many of them are prone to losses when it comes to their turn. They don’t know why. All they can say is that the company may indeed have no experience in this area.

In addition, British giants generally have their own profitable businesses, so they are not in a hurry and are just observing. This has led to missing many opportunities. Seeing that housing prices are very high now, they are worried that if they buy in at this time, there will be a sharp drop in real estate prices, so they are very hesitant.

Qi Dezun smiled and said, "That's even better. You also know that among the British companies in Hong Kong, very few can do a good job in real estate business, but Huang and I can. There is no doubt about that. If you are not confident in cooperating with Chinese companies, you can cooperate with me. I am also a major shareholder of Hong Kong Electric, so it's perfect."

Hutchison Whampoa was able to grow big by manipulating the stock market, but it also had very good business operations, otherwise the stock market would not have been hyped up at all.

The real estate business is also one of Hutchison Whampoa's key businesses. Many of Hutchison Whampoa's subsidiaries are indirectly controlled by Qi Dezun or jointly operate real estate, and they all make good profits, no worse than other Chinese real estate companies. This is one of the reasons why Hutchison Whampoa's market value can reach 30 to 40 billion.

Wells thought for a moment and said, "If that's the case, then we might be able to cooperate, but I still need to go back and negotiate this matter."

"Okay, then I'll wait for your good news." Qi Dezun was not in a hurry. The value of HK Electric's land was in the billions according to the current market value. Such a high-value cooperation could naturally not be decided quickly.

After Wells left, Qi Dezun's expression gradually changed from smiling. The assistant beside him added fuel to the fire, "Chairman, Wells obviously wants us not to interfere with any of HK Electric's actions."

"It's normal from his perspective, but taking over HK Electric means a lot to us. I will never give up." Qi Dezun said slowly.

The assistant said, "Yes, if HK Electric becomes part of Hutchison Whampoa, that will be enough to make the share price soar, which is of great significance to our expansion. However, Wells and his people have been running HK Electric for more than ten years and have control over everything. If he does not cooperate, it will probably be very troublesome."

Even if some management members do not have any shares, they control too many company secrets and too many people. Let alone Hutchison Whampoa, an outsider, even if HK Electric really has a major shareholder family, if they want to move against such people, they must be fully prepared. At the very least, they must have someone capable of taking over the company immediately after driving them out, otherwise the entire company may be in trouble.
Especially since HK Electric is an important infrastructure company, once a problem occurs, causing power outages in many places, it will cause great public opinion and the Hong Kong government will definitely intervene, which may have a reverse impact on Hutchison Whampoa and even cause its share price to fall, which would be even more embarrassing.

Qi Dezun nodded in agreement and said, "For now, we really can't touch Wells. We have to cooperate with him. I can only agree to his conditions first. When I become a major shareholder in the future, I will see if I can divide the management of HK Electric. I don't believe that such a large company doesn't have different interest groups. There must be people who want to replace Wells."

There is no country or company that is completely united. This is an iron rule.
The assistant suggested: "Chairman, I actually have a way. We can agree to Wells's conditions, but this will allow shareholders to know the exact opposite and think that we have taken control of HK Electric."

"What do you mean? We cheated the stockholders? Do you know what you are talking about?" Qi Dezun frowned slightly;

Hutchison Whampoa has indeed been creating a stock bubble, but it has also been operating in a gray area, often exaggerating its achievements, but has not yet done anything directly deceptive;
If this kind of thing is discovered, not to mention that it is illegal, once the trust is gone, it will be completely over. The assistant said: "Chairman, it's not us who are talking. In fact, even if we hold a press conference, how many people will pay attention? They can know, don't they all know through the media? So just let the media do some publicity, even if it is a little different from the facts, once the conclusion comes out, it will be enough."

"That's fine." Qi Dezun thought for a moment and agreed.

The assistant said, "Then I will immediately arrange for someone to contact some reporters, especially those who have no principles."

"Well, but you don't have to show up. Do it anonymously and put some bribes in it. If these people are smart, they will naturally understand." Qi Dezun said with a smile.

The assistant smiled and said, "Okay, I understand."

The next day, Qi Dezun asked Wells out and said directly: "Wells, I can agree to your conditions. After I become a shareholder, I will not interfere with you. You can just operate the business as before. It is just like changing a shareholder."

"That's good, Mr. Qi Dezun, I hope we can have a pleasant cooperation." Wells raised the red wine in his hand and said with a smile;
Although he knew in his heart that this matter would not be so simple, this was the best result that could be obtained at the moment. There was no other way. After all, the other party had invested with strong capital, and according to the law, the management could not stop it. He relied on uniting the management to fight against the foreign major shareholder, which was actually a kind of game behavior.

As for the future, he also knew that there might inevitably be some struggle, but that could only be discussed later. Moreover, if Qi Dezun was not too ambitious, then perhaps they could really live in peace.

Qi Dezun continued, "Then we still have two things to discuss. The first is that I will continue to acquire 10% of HK Electric's shares. For this money, I think you should conduct a private placement. In this way, this money can flow into the company instead of being a bargain for outside shareholders.
This way, it will be a better outcome for both you and me, what do you think? "

If the acquisition continues, it will inevitably lead to more external funds entering the market to buy HK Electric shares, causing his acquisition costs to increase sharply, and even the cost of the last 10% will exceed the previous 20%.

"Okay, that's no problem. We'll negotiate a financing price internally then." Wells agreed without much thought.

If a company is controlled by a major shareholder and is asked by an outside shareholder to issue a private placement, it will generally not agree, because this will dilute its own shares and threaten its rights;

But HK Electric has no major shareholders and they are just employees. Maybe they get some stock rewards during the operation, but it is not much at all, so it doesn’t matter if they are diluted.

"Okay, we'll discuss the price next time." Qi Dezun nodded, and then said, "Then how should we cooperate in real estate?"

Wells said: "It's very simple. We will follow the model of many British companies. The two parties will first set up a joint venture company with 55% shares. The joint venture company will pay to buy part of the land of our Hong Kong Electric. Hong Kong Electric needs to recover this cost first;

Then the joint venture company will operate the real estate business for you, and after the project is completed, you can divide the profits according to your shares. How about that? "

"Why not develop it first and then divide the profits after development?" Qi Dezun asked with a frown;

This method is indeed a common routine used by British and Chinese companies in Hong Kong when they cooperate. It will only cause the Chinese companies to be heavily indebted, but the risks can generally be controlled.

But Hutchison Whampoa is already heavily in debt. After all, the acquisition of so many shares of HK Electric has put it under tremendous financial pressure.

Wells shook his head and said, “This is a must. As a public company, HK Electric cannot make losses in any business, let alone affect its power generation business. You know this.
So even if you are doing real estate business, you must first recover the cost according to the market price and then operate it. Otherwise, what if you lose money? "

Although most British companies are not good at the real estate market, they are not fools. When many British companies start to cooperate with Chinese companies, they do develop first and then share the profits. As a result, the Chinese company operates the entire project and makes a lot of money, but the overall project does not make money or even loses money.

The accounting here is very good. Through various means, the profits are transferred away, which is completely legal. The British investors are furious, but there is nothing they can do. Even a lawsuit may not be successful.

Therefore, the agreement was later changed to sell the land first, at least according to the market price, they would not lose money. Then, if they formed a joint venture later, whether they made more or less profit, they would be acceptable.

"I'll think about it." Qi Dezun did not refuse in the end.

A day later, Qi Dezun found Yang Wendong and told him about Wells' request. He asked, "Mr. Yang, what do you think of Wells' request?"

"From his point of view, there is no problem." Yang Wendong is also very reasonable. Everyone is thinking about himself.

Qi Dezun agreed, "Yes, I know that, but all his requirements combined will require a huge amount of funds."

"Although it is a huge amount of funds, once the land of HK Electric is developed, the profit will be higher." Yang Wendong said with a smile: "And according to your model, isn't it the most important to increase the share price of Hutchison Whampoa? As long as the share price of Hutchison Whampoa rises again, the funding problem can be solved naturally. "

Qi Dezun thought for a moment and said, "That's true. A lot of money can be obtained through financial means, but this amount is very large."

"Are you worried about the risks?" Yang Wendong asked back.

Qi Dezun smiled and said, "That's not the case. I am still very confident about the future of Hong Kong. It's just that with so much capital, it's not easy to get a bank loan, so I hope Mr. Yang can come forward and ask Hang Seng Bank to give us more credit."

"Hang Seng Bank is also independent, just like you and Huang. Although I am a major shareholder, I cannot interfere too much." Yang Wendong shook his head and said, "But I can tell you that I can give you a larger credit line, but the collateral cannot be less, and the interest rate will probably not be low. After all, you and Huang have already borrowed a lot of money from Hang Seng."

Qi Dezun thought for a moment and agreed, "Okay, thank you for your hard work, Mr. Yang. I will not reduce the introduction fee or anything like that."

"Okay." Yang Wendong nodded. Although the referral fee was not much, he had come forward himself, so there was no reason to refuse it.
Now that Hutchison Whampoa has acquired HK Electric, it is going to work with HK Electric to develop the land. This land development has not even started, but it will require a large amount of money to be invested;
All these combined will seriously increase Hutchison's debt, which is also what it needs. Once the economic crisis breaks out, Hutchison will be like a fish on the chopping board.

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(End of this chapter)