With Li Ka-shing Out, Empire Seen Ripe for Change of Guards
With Li Ka-shing Out, His Empire Seen Ripe for Change of Guards
(Bloomberg) -- Now that his 89-year-old father is stepping aside, incoming CK Hutchison Holdings Ltd. Chairman Victor Li will face the challenge of reinvigorating a business empire that’s gotten long in the tooth.
With the average age pushing 73, the board of directors that the 53-year-old executive inherits will be the oldest on the Hang Seng Index -- even after Hong Kong’s richest man officially steps down in May, according to data compiled by Bloomberg. Affiliates CK Asset Holdings Ltd., CK Infrastructure Holdings Ltd. and Power Assets Holdings Ltd. aren’t far behind, with all of them ranking in the top 10 by that measure.
"They have the oldest management in Hong Kong among big companies," Francis Lun, chief executive officer at Geo Securities, said of the CK group, whose businesses span across more than 50 markets. "You need some new people with new ideas because otherwise, you would just concentrate in the old things."
In an age where technology companies are the dominant drivers of growth, the Li-family’s empire may be stable but doesn’t exactly radiate cutting-edge vibes. The group’s main businesses include operating shipping ports to supplying water, drilling for oil and selling groceries. Its biggest earnings driver in recent years has been providing mobile-phone services in saturated European markets.
"It’s an old-economy stock," said Alex Wong, Hong Kong-based director of asset management at Ample Capital Ltd. "They missed out on the global technology wave in the last decade. They already lagged behind a lot and it’s hard for them to catch up."
Shares of CK Hutchison, CK Asset, CK Infrastructure and Power Assets -- the group’s four biggest companies by market value -- all fell in Hong Kong on Monday. The retirement was announced after the end of trading on Friday.
To be sure, patriarch Li Ka-shing has delved into tech by being an early backer of companies such as Facebook Inc., Spotify Ltd. and Airbnb Inc. but those investments were made through his Horizons Ventures venture-capital firm and aren’t part of the family business’s main operations.
When his iconic billionaire father announced his long-awaited retirement, Victor Li told reporters not to expect major changes any time soon. The younger Li also said there were no plans for internal restructuring. Representatives at CK didn’t respond to a request for comment during the weekend for this story.
Yet the group may be ripe for change. At the CK Hutchison flagship, almost all inside directors have been working at the group for at least two decades, including Canning Fok, who’s in his late 60s, and septuagenarian Kam Hing Lam, who’s Victor Li’s uncle. Excluding directors who are currently serving as part of CK’s management, more than half of the board’s members are 80 or above.
Fok, a longtime Li Ka-shing lieutenant and the architect behind the group’s foray into European telecommunications, told reporters Friday that he isn’t ready for retirement. When asked about the prospects of stepping down, he said: "Do I look like a guy who will go to retirement?"
Besides, there are many other leaders within the group, said Frank Sixt, 66, who’s group finance director and deputy managing director.
"You may only see our old faces, but there is definitely a lot of young and energetic talent across the company all over the place," Sixt said.
Another turnoff for investors has been that the lines between the various Li-family companies have become increasingly blurry in recent years. For example, CK Asset, CK Infrastructure and Power Assets all invest in infrastructure -- often together. CK Asset, spun off in 2015 to become the group’s property arm, is now its own conglomerate by branching out into businesses such as airplane leasing and electricity.
"It creates confusions to investors," said Kenny Tang, chairman of the Hong Kong Institute of Financial Analysts and Professional Commentators.
What’s clear is that CK no longer commands the same level of attention from investors than it used to. Based on trading volume, the Li family had among the top 10 stocks within the Hang Seng at the turn of the century, according to data compiled by Bloomberg. This year, their rankings have fallen to below 30th.
One thing that the incoming chairman could do to revive interest, even if he sticks to a path of risk aversion and keeps investing in stable businesses, is to bolster dividends -- a longtime gripe among minority shareholders. Management is aware of such demands but the priority again is to keep a good balance between accumulating profits and returning them to investors through payouts.
"Hopefully in time, shareholders will think that our balance is okay," Fok said.
To contact the reporter on this story: Prudence Ho in Hong Kong at pho83@bloomberg.net.
To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Kenneth Wong at kwong11@bloomberg.net, Robert Fenner
©2018 Bloomberg L.P.