Superboy is back. Will his luck be as good this time?
By Dan Sabbagh
IT HAS been a hectic few years for the Hong Kong
billionaire Richard Li. The second son of Asia’s richest man pulled off one of the most audacious deals in business history, appeared on the front cover of Time magazine, watched shares in his company collapse 95 per cent and was accused of falsely claiming a degree from Stanford University.
Now the 36-year-old once fêted as “Superboy” wants to try his luck again — by buying the stricken telecoms group Cable & Wireless for £2.4 billion in cash when his business, PCCW, doesn’t have the money to afford it. It is an extraordinarily opportunistic move for man whose business success has been built on connections, timing and luck.
With nothing more than a good name, a political fair wind and an extraordinary market capitalisation, Richard Li managed in 2000 to buy Hong Kong’s old telecom monopoly from Cable & Wireless in a highly leveraged $28 billion (£17 billion) deal. So giddy was PCCW’s valuation back then that if the British group had been selling out a few months earlier, or later, he would never have been able to do it.
Now the business in which he owns a controlling 38 per cent shareholding wants to turn the tables on Cable & Wireless, the telecoms group that began life as the communications network for the British Empire. Allies are talking up a possible bid in the hope that Cable & Wireless’s suffering shareholders will force the London-based company, which is without a chief executive, into talks.
Richard Li first learnt about business from his father, Li Ka-shing, the magnate behind Hutchison Whampoa, the ports-to-telecoms trading conglomerate. Richard, however, quickly chose to make his way outside the family firm, unlike his elder brother Victor.
But it was his father who gave him his first break. In 1990, with the help of $125 million from Dad, Li set up Star TV, an Asian satellite broadcaster. Although he did not make Star profitable, the business was successful enough to be acquired by The News Corporation, parent company of The Times, in 1995 for about $1 billion — netting him a substantial profit.
The deal brought him to public prominence, and he maintained a high-profile, lavish bachelor lifestyle. At his Millennium Eve party the singer Whitney Houston was paid to entertain guests. Meanwhile, he used the Star profits to create Pacific Century — a company named in the belief that the future was Asian.
Li struggled to replicate the success of Star at first. In March 1999 he controversially won a HK$13 billion (£1 billion) untendered contract from the Hong Kong Government to build a high-tech office and residential complex called Cyberport. Accusations of cronyism followed but the contract survived.
Then in May, he announced plans to reverse into Tricom Holdings, a small telecoms firm quoted on the Hong Kong Stock Exchange. Its shares soared 1,800 per cent in one day as he promised to turn Tricom into an internet investment fund.
Li announced plans to develop a pan-Asian high speed internet service, Network of the World (NOW). It was later abandoned, but efforts like this gave Tricom, renamed Pacific Century Cyber Works, or PCCW, a market capitalisation of more than HK$150 billion and a position as one of Hong Kong’s top ten companies.
Meanwhile, over at Cable & Wireless, the newly installed chief executive, Graham Wallace, had decided he wanted to sell his company’s prize asset: its majority stake in Hongkong Telecom. Growing local competition and a desire to expand into internet-based services elsewhere in the world meant that the business was on the block.
An informal auction process began late in 1999 and the front-runner to buy the company was Singapore Telecom (SingTel). However, as news of SingTel’s interest leaked into Hong Kong’s business and political elite it was met with hostility — such is the rivalry between the two port city-states. Although the Chinese Government pretended to be neutral, behind the scenes it was clear that if Cable & Wireless was a seller then the buyer had to be local.
Li scrambled to put together a counterbid of cash and his highly rated paper. He took out an enormous $10 billion bridge loan to help him to close the deal and, significantly, got the Bank of China to act as one of his lenders. The offer was attractive enough, had the support of the Chinese Government, and was probably worth more than the unpublished SingTel offer at the time.
Cable & Wireless agreed to sell out in February and Li was immediately hailed as a saviour. The cult of personality that had emerged around him reached fever pitch. His movements and dress in the close- knit Hong Kong community attracted press comment. A local daily ran a story about his wearing a casual shoe without a sock. Was this the beginning of a new fashion? Li completed the takeover in August, saddling his company with massive debts as the dot-com bubble was beginning to burst. Within weeks the PCCW share price began a sickening collapse.
The subsequent annual meeting in May 2001 was extremely hostile. Former Hongkong Telecom shareholders rued the loss of their dividends and the collapse in the value of their shares. Meanwhile, claims made in gushing profiles and corporate documentation that Li had a computer engineering degree from California’s Stanford University proved to be false. He had started a course there but never finished it.
Li dropped out of the limelight. There was even speculation last summer that he might stand down as chairman and chief executive of PCCW in favour of Mike Butcher, the recently imported chief operating officer.
PCCW became little more than an incumbent telecoms group with a few property interests attached. Its debts were reduced to a little over $4 billion and the share price was roughly stabilised, as Li appeared to concentrate on running the business. Now, however, it is clear that he sees that phase as little more than a pause as he hunts for more acquisitions in the territory of his homeland’s former colonial masters.
Curriculm Vitae
Name: Richard Li
Age: 36
Birthplace: Hong Kong
Education: Stanford University, computer science (degree not finished)
Father’s job: Chairman of Hutchison Whampoa trading conglomerate.
Student jobs: Investment banking
Current job: Chairman and chief executive of PCCW
Pay: Most recent salary estimated at HK$26 million (£2 million)
Interests: Cars, boats and a jet
Wealth: 38.9 per cent stake in PCCW worth about £4 billion
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