Richard Li's call of destiny
(Filed: 09/02/2003)
Can the son of Asia's richest man, asks Edward
Simpkins, shed his playboy image and succeed in grabbing Cable & Wireless?
Richard Li, the billionaire Hong Kong playboy and second son of Asia's richest man, was once hailed as the Far Eastern prophet of the internet era and a guru of the new economy.
He pulled off one the largest and most audacious takeovers in Asian business history and his name became as ubiquitous in the society pages as it was feted in the business press.
Since then shares in his company, Pacific Century Cyberworks, have lost 95 per cent of their value while Li's personal stock has slumped with the disclosure that he dropped out of Stamford University without graduating. Meanwhile, his esoteric pronouncements about the internet are no longer in vogue.
Fast forward to last week, when Asia's most eligible bachelor set out to prove his business credentials again with a stonking deal that his friends say will move him out from the shadow of his father, Li Ka- Shing, the tycoon behind the Hutchison Whampoa telecoms to transport conglomerate.
The 36-year-old Li has written to Cable & Wireless, suggesting talks with a view to making a bid for the 130-year-old telecoms company.
The approach, said to be worth £800m more than C&W's £1.5bn market value, was rebuffed out of hand by Richard Lapthorne, the new executive chairman of C&W.
With C&W's shares stuck at 64p, compared with the putative offer of 100p, the market does not currently seem to rate his chances of success terribly highly.
This is a mistake, according to bankers who have dealt with Li before. One former adviser said: "You should never underestimate this guy because you never know what his backing is. All of a sudden, Bank of China might turn up putting $10bn behind him." And he has pulled off big deals before.
Backed by his father, Li set up the Asian satellite channel Star TV in 1990. He never made it profitable, but grew it to the point where it was bought by Rupert Murdoch's News Corporation for about $1bn in 1995. This represented a handsome return on the $125m invested by his father.
Li junior revelled in the acclaim that deal brought and used the profits to set up Pacific Century, his own vehicle.
Pacific proceeded to win a £1bn contract from the Hong Kong government to build a high-tech office and residential development called Cyberport - though Li faced accusations of exploiting his father's considerable political influence.
Li floated Pacific on the Hong Kong stock exchange and the shares shot up by almost 2,000 per cent when he announced the company would become an internet investment fund. Li used that massively inflated rating to buy himself into a "real" business that would still be around when the internet bubble burst.
Ironically, C&W provided him with that opportunity. It was looking to sell off what it saw as mature businesses and buy into supposedly high-growth businesses transmitting data - a strategy its shareholders now rue. So it entered negotiations with Singapore Telecom to sell its stake in Hong Kong Telecom.
When the news leaked, Li managed to put together an audacious £18bn cash and shares bid to snap up Hong Kong Telecom in an astounding two weeks.
One of C&W's former advisers said: "We were called in to meet his advisers to hear Li's proposal. After sitting in total silence facing them for six minutes, I asked to speak to one of them outside. He took me down a corridor to see Richard who, with his shaved head and spectacles, looked like Dr No in a large leather arm chair.
'Let me tell you a secret', he said. 'We don't have a proposal but we do have a very nice country club. Why don't you go there and have lunch and by the time you get back we will have one'."
If the HKT deal marked the high point of Li's career, some would say it has been downhill ever since. PCCW has gone from internet wonder stock to dull telephone utility in a mature market. It has concentrated on cutting its costs and whittling away at its $4bn of debt.
"I don't think he is particularly well regarded," one Hong Kong telecoms analyst said. "Investors voted in a poll recently on how they rated the management of the top companies in Hong Kong and PCCW did not do particularly well."
She points out that Li recently set out a strategy of diversifying into growth areas by buying stakes in other regional fixed-line telecoms companies or Chinese software firms. "But that doesn't generate as much publicity and glamour as bidding for C&W," she added.
Friends of Li question whether he will content himself with the life of cost-cutting and incremental debt reduction that has been his lot for the past two years.
He wants a big deal that will put PCCW on the global map. However, they say that the realisation that thousands of HKT employees depend on him for their livelihoods has helped the man once known as "superboy" to mature.
"He's become a nicer person," one friend said. "When I first met him he would fly off the handle, especially if you mentioned his father backing his businesses. But he's still desperate to prove himself to his father as his business equal."
Critics claim that he has yet to put his playboy years behind him. "He still loves his toys, he's got fast cars, the fastest boat in Hong Kong, lots of pretty girls and he doesn't seem in a hurry to get married."
They also say that his advisers have counselled him to take a lower profile and to lay off making visionary statements about the internet.
Those advisers are adamant that a bid for C&W is the right thing to do. They say that its regional businesses in the Caribbean, Bahrain and Macao are all cash generative and that losses in the US business could be stemmed with the help of PCCW's bidding partner, Texas Pacific, the US buyout specialist.
"The regional business of C&W is like a lot of little Hong Kongs. Why isn't that right on strategy?" one said.
The C&W board, led by Lapthorne, has dismissed Li's offer without putting it to shareholders and has refused to allow PCCW access to its books to carry out due diligence. "Lapthorne's got no management team, he's losing £1m a day in the US, the company is a total basket case," one Li adviser complained. "It's beyond me why he won't talk to us."
Lapthorne will not give up without a fight. The campaign to land C&W will be a much longer and more complicated process than buying HKT and Li appears to be in hot water with the Hong Kong market regulator for making contradictory statements about his intentions.
In the coming days, Li's handling of the complex game of ensnaring C&W will determine whether Superboy has come of age.
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