Two Bean counters take over Singapore, Hong Kong!
20 Mar ,2000
It is surprising to find that few people now in the stock market in Hong Kong remember the rise of the Slater Walker Group. This company, a corporate partnership between an accountant, Jim Slater, and lawyer, Peter Walker, was dominating markets throughout the English speaking world with a new concept, so they called it, of corporate growth.
This could be called, nowadays as it probably was then, asset stripping. In fact this process has been adopted and adapted by many others, and perhaps the later ones included KKR's attack on RJ Reynolds Nabisco, and probably Alan Bond who had had big designs on Hong Kong, including the TV and radio industries and the Bond Centre, now know as the Lippo Centre.
The theory is that by massive promotion they could boost their own shares to a level which left assets far behind, and was ahead of the market in perceived earnings. That way they could make passes at smaller more lethargic companies, and offer them their own shares at a discount in exchange for the larger, in proportion, assets of the prey.
Having taken over for shares, never for money as that was too much of a precious commodity, they would then sift through the acquisition tidying up some of the poorer managed units and selling those other units whose earnings did not match up to their own expectations. In this way they could continue to maintain growth at a higher rate than most other companies.
In Singapore Slater Walker used a patent medicine company, called Haw Par, the pioneers of Tiger Oil, and with this they had amalgamated a bank, a newspaper and many other diverse interests. They had managed to convince the Singapore authorities that Slater Walker was interested in remaining in Singapore and would develop their financial infrastructure. In this way they were able to obtain waivers against foreigners obtaining control of newspaper and banks.
In Hong Kong they took another potent medicine company, Kwan Loong, as their flagship, and by a complex method they earned many supporters. Also because the public idolised the system they were able to arrange share exchange at rates hugely advantageous to themselves.
The representative in Hong Kong was Alan Johnson Hill, who then became a W I Carr broker who then was instrumental in introducing Li Ka-Shing both to the Hilton Hotel, Green Island Cement and then on to Hong Kong and Whampoa Dockyards, the company which by its later merger, under K S Li, with Hutchison, had created Hutchison Whampoa.
But that was after the collapse of Slater Walker, a collapse which followed a breach of their promise to build up the Haw Par group by seeking to profit by a quick sale of assets, and when the wrath of Lee Kwan Yew and the PAP party is incurred there is nothing to prevent their vengeance. In fact the Singapore representative was charged and was sentenced to spend 3 years in Changi goal. If either Jim Slater or Peter Walker set foot in Singapore there was a warrant for arrest awaiting for them.
At that stage, during the late 1960s and early 1970s, there had been a boom, such as the current one in Hong Kong, or what could be called in modern parlance a bubble. This had stretched from London, to Australia, to Singapore and to Hong Kong, but the basic theory was in fact to take over real assets with the dream of wealth. Perhaps this dream might have been called the greed factor.
But when a dream is punctured, it acts just like a balloon, because they are both filled with hot air. If you delude the public, the ordinary, all too often naive, investors, that there is a brand new rainbow in the sky then they will all seek to find the pot of gold at its end, and as one knows there is no end to a rainbow as it is all just an optical illusion
So that was then the way of the KKR takeover of RJ Reyndds Nabisco. This had been too big a pie that it overindulged the bidder's appetite and subsequently KKR has remained rather mute and reluctant to slay any more goliaths.
This current generation has been led by AOL with its enterprising bid for Time Warner. The pattern of Slater Walker had again been repeated. AOL is the best known content provider on the internet specialising in interactive avenues such as the popular chat shows, or in other words specialising in the dispersal, according to its detractors, of smut and pornology. But that is merely a small part, but an active one, of the whole of AOL's operations.
AOL had a minimum of real tangible assets as its strength is basically its goodwill, representing its name and the publicity which had built it. These are ethereal assets which have no real permanence and do not of themselves cost much. Time Warner had quite a lot more of assets, although that also traded in dreams and ideas, as a magazines circulation is not transferable or saleable without the magazine and its continuing publication. So to a large extent it was a balloon taking over another balloon, but a more established balloon.
So when it came to Hong Kong the acquisition of Hong Kong Telecoms by Pacific Century CyberWorks was a fully new phenomenon. PCCW had not gained any experience in building up earnings at a higher rate than others, as it has no earnings, nor would have had perhaps for another two years. It had no established presence, as the public has not yet even been approached to see whether they like the product. But it was the hype, the exposure, and the media attention which had managed to be harnessed to this corporate being, and which had translated it into real money, through the inflation of its supposed reputation.
In exchange it has acquired a company with real saleable assets, a broad network of telephone lines into which it can channel communication, oral and visual. In addition it managed to capture a stockpile of cash, as well as the potential for recurrent earnings. None of these had been as yet available to PCCW. This as a takeover must be a world precedent.
Stirred by the gullibility of the Hong Kong investing public all the world's quick money men are now aiming for Hong Kong. The Americans are here in abundance, the Japanese have arrived and of course we have our own local talent, all looking to capture what they can of the world's speculative loot because by the audacity of this takeover all are homing in on us, to our current temporary delight. However there can be no way that this will be permanent.
Hongkong.com, Tom.com, Global Vision, Softbank, Hikari Tsushin, Netalone, Acme Landis, SUNeVision are all aiming at the same target. But while Hong Kong has become the battlefield the contenders in the lists are as much as anything from the financial markets of USA, Europe, including London, Frankfurt and Switzerland, from Japan and from our other Asian neighbours.
There is precious little that these companies can contribute to this society, or any other society, but they will for a short while at least bring an aura of prosperity to our Hong Kong stock market. And the basis of this greed is envy, for young Richard Li, the young David whose slingshot brought down Goliath. (finis)
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