Li Ka Shing

Background

Li Ka-shing, an icon of Asia’s economic rise in the postwar era, through his businesses employs 270,000 people in more than 50 countries. He also has made personal investments in Facebook and Skype, and is one of the world’s top philanthropists. He started his remarkable career making toys and later, plastic flowers. Succession Li said his elder son Victor would be his successor at Cheung Kong and Hutchison Whampoa. “Victor will assume the stakes I hold in the listed firms, including the 40% stake in Cheung Kong and the 35% stake in Canada-listed Husky Energy,” Li told reporters. He will be responsible for Cheung Kong’s group business in the future.

” The current market value of Li’s 40 percent stake in Cheung Kong and his 35 percent stake in Canada-listed Husky Energy is around HK$140 billion (US$18 billion). Victor has been the deputy chairman of Cheung Kong since 1994 and managing director since 1999; he is also deputy chairman of Hutchison. Li senior is the chairman of both companies. Richard, who ranked No. 960 with wealth of $1. billion on the same list and runs his own telecommunications empire, “will also have a very successful career” , pledging his “full support”. The move should help avoid a family feud – “there will be no conflict” among Victor’s and Richard’s businesses, said Li, who Forbes estimates is worth about US$25. 5 billion. Businesses controlled by Richard include PCCW Ltd. , Pacific Century Premium Developments and the HKT Trust. Li said he would support Richard’s new projects with “cash,” and the younger son’s assets would increase “several-fold” through the father’s support.

Richard is in acquisition talks with “several sizeable companies, Victor now holds two-thirds of Li Ka-shing Unity Holdings Ltd after Richard transferred his one-third holding in the family trust to him on July 16, 2012, according to a filing to the Hong Kong stock exchange. Li Ka-shing will continue to hold the remaining third of the trust, which controls Cheung Kong (Holdings) Ltd, Hutchison Whampoa Ltd and other affiliate companies. Victor has three daughters and a son, Michael, and Richard has three sons, the eldest being Ethan. ttp://www. campdenfb. com/article/li-ka-shing-plans-succession-avoid-family-feud http://www. forbes. com/sites/russellflannery/2012/05/28/hong-kong-in-transition-elite-family-businesses-are-facing-change/ http://english. sina. com/business/p/2012/0721/488324. html Challenge Li’s challenge may be that his model is outdated. Hutchison trades at a discount of 37 percent to its component parts, according to Credit Suisse, suggesting it might be worth two-thirds more if it were broken up.

But while Victor Li is there to ensure continuity, he may create most value by deviating from his predecessor’s grand plans. Recommendations Some of Asia’s largest listed companies are family run, and succession plans are tightly held secrets, often only revealed through wills at the death of their founders, leading to bitter internal feuds. It is a positive move of Li to have clear-cut who is having what, avoiding potential struggle for shareholding, and it is good for the long-term stability of the group.

Li also assures a loyal follower Victor who shares his values, and the newcomer will be surrounded by a team of long-time Li acolytes. The succession is set to be smooth and no major impact is expected on the management. Victor has been number two at Cheung Kong Holdings and Hutchison Whampoa since the 1990s. There is no surprise for his succession. Besides, there is an insurance policy. Victor will head a board followed his father for long time. Cheung Kong’s directors have served for an average of 21 years.

Even the independent directors have served for an average of 19 years. However, continuity alone doesn’t make a legacy. In the Li empire, Victor will need new tactics. Growth of Cheung Kong and Hutchison Whampoa is slowing. They have delivered almost flat returns over the past five years. Victor will need to create a more sustainable, and environmentally less destructive model. http://blogs. reuters. com/breakingviews/2012/05/30/li-ka-shing-opts-for-succession-china-style/