Wednesday, July 5, 2000
Empire of the sons
(Click on graphic to reveal full version.)
Some call him Superman, others King Midas. Asiaweek magazine, in an excess of hyperbole, dubbed him the most powerful person in the region, even ahead of Chinese President Jiang Zemin. And since his knighthood was announced last month, you can call him sir.
But Li Ka-shing's position as Hong Kong's capitalist alpha male is being challenged - by none other than his youngest son. Investors and pundits have watched with bated breath as Richard Li Tzar-kai, 33, cleared a succession of hurdles during the past few months to pull off Asia's biggest ever takeover, his US$30 billion (HK$234 billion) bid for Cable & Wireless HKT.
He entered the home straight this week after Monday's overwhelming vote in favour of the move by HKT shareholders, with only the formality of High Court approval of the final arrangements to be secured.
This deal sees him step up to the blue chip big league and is a giant stride closer to his dream of joining the ranks of the Internet titans.
But behind the number-crunching and the wheeling and dealing, an equally fascinating domestic drama is being played out. What goes on behind the palace gates of the world's 10th richest family, and how has Richard Li's meteoric rise affected the balance of power? While older brother Victor Li Tzar-kuoi, 35, seems content to play the dutiful son, being groomed to take the reins of the family flagship, Cheung Kong Holdings, Richard has made it clear he will settle for nothing less than making his Pacific Century Group (PCG) number one.
On paper, at least, he is rapidly amassing funds that could soon rival the fortune it has taken his father half a century to build, in a dawning epoch where Internet upstarts like America Online have proven they can swallow venerable giants like Time Warner.
Then there was the recent decision by global indices provider Morgan Stanley Capital Intern-ational to drop Cheung Kong Holdings from its index after 24 years because its total market capitalisation was less than the market value of its stake in Hutchison Whampoa. Richard Li's Pacific Century CyberWorks meanwhile, was one of the new additions to the index. And with the elder Li now 71, what will happen when he dies, or decides to retire? Will his death bring the none-too-chummy brothers together, closing ranks to protect the dynasty?
Or will sibling rivalry and bloated egos result in a declaration of war? A drama of Shakespearean proportions could be in the offing.
Talk to a dozen people close to the family and you'll get a dozen different opinions on the degree of animosity between the two sons, and how much of Richard's drive stems from Victor’s role as heir apparent. They are certainly like chalk and cheese - the latter a family man, who has been content to quietly learn the ropes and trudge along in his father's footsteps. In March last year, Victor told Fortune magazine he and his father were "very similar in business strategy, thinking and lifestyle, except that I don't play golf".
Richard, on the other hand, is known for reducing his minions to tears with his rants, lavishing cash on a nearly built Shek O mansion and fuelling his adrenalin habit with diving jaunts and daredevil flying stunts. He also has an eye for women, reportedly splitting recently with former employee and university student girlfriend Karen Lam in favour of an 18-year-old employee named in the tabloids as "Joanne". Lam later complained that life at the speed of Richard precluded "normal things like walking in the park".
Theories abound as to how far Li the patriarch is willing to stoop to catch his younger son if he stumbles. It was US$125 million of his father's cash, but undeniably Richard's drive and vision, that enabled him to create Star TV in 1990 and flog it to Rupert Murdoch in a deal worth US$950 million, finalised in 1995. It was also Li who came to the rescue when some Japanese property deals and a satellite communications venture, Corporate Access, went south.
One close source says: "His dad definitely helped him on the satellite thing. The cost of it was something like US$66 million. There were 100 staff in Singapore - now there are maybe one or two. Hutchison bought it and buried it in a mound of millions, so no one can really see what happened."
Another source close to the family says: "Both sons are very different from other tycoons' kids, who are generally playboys. Victor has worked hard to prepare himself to take over the empire. And he has to contend with others inside and outside the company who see him as his father's shoe-shine boy, so I don't think he's really a happy man.
"Inherited wealth doesn't impress people as much as the wealth of self-made men. I guess you could say he has a bit of a chip on his shoulder about that. I don't think he has the flair or charisma of his father when it comes to making deals. Richard is different, he's more of an entrepreneur. He doesn't like to talk about his father much. He's desperate to prove he can make it on his own. Who is the favourite? I would say KS probably likes Victor more, but I think he admires Richard's drive and energy."
Will antagonism and simmering grudges spill into the open when Li Ka-shing's pervasive influence is gone? "I think it's likely," says the source, who like many people contacted for this piece did not want to be named. "Richard has some cross-shareholdings in Hutchison and Tom.com, but he's serious about being number one, and getting people's respect that he did it his own way."
Li, though, seems in rude health, dismissing as malicious rumour recent reports in the Chinese press that a medical check-up revealed heart problems. It is likely that for some time yet he will preside over his vast empire, commanding equal measures of respect, fear and loyalty. The bespectacled colossus casts a long shadow over Hong Kong: he and his sons control companies that account for almost a third of the total capitalisation of the Hong Kong stock market. It is nigh on impossible to get through a day in the SAR without helping swell the elder Li's coffers, built on bricks and mortar, but also spanning retail chains, power supplies, a vast mobile phone network and the world's largest container port operations. Chaos ensued when he finally decided to bolster his bricks with clicks, proclaiming in neon from one of his glass monoliths the launch of the Tom.com Internet portal. Ma-and-pa investors jostled around city blocks and a policeman got caught jumping the queue to snare a slice of the one-time plastic flower seller's foray into the New Economy. Apt, then, that his name approximates the Cantonese pronunciation of "Li Family City".
Richard, however, is snapping at his heels, aiming to create nothing less than the "world's largest broadband Internet business". He laughs off reports that the HKT deal was hatched in the smoky backrooms of Beijing, as he does the howls of protest from other property moguls about the prime slice of government land at Pokfulam granted without public tender to his company to build the Cyber-Port, where 15 of the world's most powerful Internet companies from Microsoft down have pledged to be anchor tenants.
In an interview with Newsweek recently, he admitted the HKT deal would create a potentially "embarrassing" face-off with his father in the mobile phone sector. "Obviously, if we can avoid butting heads, it's better, but if we do it's all business - we compete."
One veteran investor says: "Victor is prepared to be the good son, the traditional Chinese boy. And until the hi-tech thing became interesting, he certainly had the better job. Cheung Kong was where all the money was at a couple of years ago - Cheung Kong infrastructure was great stuff, and Victor was clearly the chosen one.
"Now the hi-tech stuff is [gaining ground], Richard is looking better, although personally I don't believe in the guy. I think he was suckered into Cable and Wireless HKT. Who wants it? AT&T, British Telecom, MCI Worldcom, they're all on the prowl for acquisitions. They've all got the cash. But none of them were interested. And a merger with SingTel would have been a merger of two dinosaurs.
"As for what will happen between the brothers when KS is gone, I think they're smart enough to realise any bloody battles would just damage both of them."
Father and sons are fiercely private, insulating themselves with formidable spin machines and a small army of minders - not least since Victor was kidnapped by "Big Spender" Cheung Tze-keung in May 1996 and a HK$1.38 billion ransom demanded.
There was also the controversial 1990 death of Li senior's wife, described by the family as a result of heart problems, but later reported in Next magazine, based on police transcripts, as a sleeping pill overdose. Next's unpredictable and irreverent boss, Jimmy Lai Chee-ying, is one of the few publishers to constantly bait the Li family in print, a decision which must by now have cost him millions in lost advertising - particularly after reports on Li senior's relationship with attractive 40-something Chau Hoi-shuen, who has been photographed at Li's side and owns Tom.com shares worth billions.
"The relationship with Ms Chau is something that has caused friction in the family, particularly with Richard, who was very much his mother's son," says the family friend.
Li's most recent interview with this newspaper - after three years of negotiations "similar to those demanded by a head of state", according to former business editor Ray Bashford - took place in his 70th floor Cheung Kong Centre penthouse, complete with swimming pool, ornamental garden and retractable roof. It always seemed unlikely any request on my part for an audience with Li or Victor would be entertained by deadline.
In Bashford's 80-minute interview, the only comment Li made about his sons was: "A father's advice is, no matter what they do, try to be a good man. They should earn money from proper businesses."
Richard was also too busy to be interviewed for this piece, but several of his trusted lieutenants made themselves available to sing his praises. Pacific Century Group deputy chairman Francis Yuen, a former investment banker who helped string deals together for Li before siding with the son, says he likes what Richard stands for: "He could have had a comfortable life helping run the family business, but he's decided he wants to create something on his own. I'm always trying to understand where he gets that drive - what motivates him to move at the speed he does is difficult to understand.
"I think his quality of driving so hard for excellence is inborn, but he also has an insatiable thirst for information and knowledge. The other important quality is his ability to gather talent together. I think he shares that with his father.
"They are both very competitive but I don't think [Li Ka-shing] is going into the Internet to compete with Richard . . . Li Ka-shing is also extremely open to learning every day, which is how he's been able to go from plastic flowers to real estate to making Hutchison a global business. And he can see the New Economy forces are the ones that are shaking the business world."
Yuen says he doesn't think Li would be concerned if Richard ends up surpassing his success. "For a traditional Chinese father, nothing would please him more than to see his son do better."
As for competition between the brothers, Yuen knows where his bread is buttered: "I think if there is anyone I would bet on from Asia, outside Japan, to have a significant impact on the international business scene, I would bet on Richard."
We are speaking in the PCG boardroom on the 38th floor of Citibank Tower. Photographs of Richard Li hobnobbing with Margaret Thatcher, Jean Chretien, Henry Kissinger and Jiang Zemin hang imposingly from the dark timber panelling. It all seems very Old Economy, decorated, perhaps, during Richard's suit-and-tie incarnation.
The company's spanking new London offices at Chiswick are much more hip and happening, according to one staffer, with beanbags and pinball machines, in keeping with the boss's new buzz cut and geek-chic threads.
According to another staffer, there is an audible sigh of relief when he leaves for one of his many business jaunts. "When he's in the office every day it can be horrible, people are on edge all the time, but you've got to hand it to him, he makes things happen at an unbelievable pace," the staffer says. "He does get bashed around a lot in the media for his temper but often when he yells at people, they deserve it."
Richard is very sensitive about the family's public image. Stories about his father and brother are rigorously clipped and monitored. "I can't see him ever doing much business with his brother, although I think the two sons and the father still get together for a traditional Chinese family lunch some weekends," the staffer says.
Both sons were raised as princelings and attended Stanford University, in the US. Even then, Richard showed an independent streak, working as a golf caddy and a McDonald's cashier for extra money, asking only enough for rent, fees and food from dad. He then spent two years learning the ropes of investment banking in Canada before returning to Hong Kong to begin "crunching out the work", as he once put it, of setting up Star TV.
Rebecca Leung, PCG executive vice-president, has spent nine years with Richard and says he has mellowed in recent years. "He wasn't very patient before," she says with considerable understatement. "He has known all along that he was a bright kid, living under a lot of pressure and expectations, and from a young age he was determined to prove himself. People thought Star TV was just a little toy dad had given him to amuse himself with, so it wasn't until the Murdoch deal that people sat up and took notice. That was a milestone. He was working 24-hour days, living out of his office.
"He's more relaxed now, he can delegate, take half a day off when he needs to. It's true, though, his pace can burn other people out. It's still hard to keep up. This morning I felt drained, very tired. But his energy can also be very infectious. I'm not here for the money. I've made enough money. This is about a shared vision."
One former senior staffer, however, is sceptical. "Mellow? Rubbish. I don't buy it. He still screams and shouts. Employees still sometimes end up in tears. If you really think he's mellowed out, go and sit in The Godown [a bar in the Citibank basement] on a Friday after work and listen to all his executives bitching over their beers.
"He hates to admit it, but he owes a lot to his dad. If his name wasn't Li, he couldn't pick up the phone and get [Chief Executive] Tung Chee-hwa on the line. He loves to play up the wonderboy image, about how he was helicoptered on to Murdoch's yacht, blew smoke in his face and hammered out the Star deal in a couple of hours, but the fact is there'd been bankers and lawyers negotiating for months. He's got a very good PR machine, they're good at corporate myth-making."
What does he think motivates the likes of the Lis? "It's certainly not just money. Whether your stock's worth $10 billion or $14 billion, who cares? Li Ka-shing could have stopped work 10 years ago and supported his next 10 generations in grand style. It's all about the buzz and the power and the art of the deal. And some very, very big egos."