Chapter 225: Their Ambition Must Be Stopped
At the headquarters of Sun Hung Kai Properties, inside the chairman's office, Kwok Tak Seng was listening to a report from his subordinates.
The decision to acquire shares of Kowloon Motor Bus had been made personally by him.
In recent years, thanks to its rapid expansion in the real estate sector, Sun Hung Kai had grown stronger and stronger, even gradually surpassing several major British firms.
It had already entered the top twenty companies by market capitalization on the Hong Kong Stock Exchange.
Judging by the current surge in real estate stock prices, by the end of the year, Sun Hung Kai was likely to rank among the top ten publicly listed companies in Hong Kong.
Kwok Tak Seng had a clear goal:
to surpass Hongkong Land and become Hong Kong's largest real estate company.
His ambitions were never centered around Cheung Kong Holdings or New World Development;
in terms of real estate strength, he firmly believed that Sun Hung Kai was stronger than Cheung Kong and New World.
Thus, Hongkong Land was the true benchmark he sought to overtake.
The Wan Chai Sun Hung Kai Centre project, started in 1977 and still under construction, was a prime example.
Designed to be 53 stories tall with a floor area of 860,000 square feet,
its imposing and modern design was just one foot taller than Hongkong Land's Connaught Centre (now Jardine House) —
a subtle but unmistakable statement of Sun Hung Kai's ambition to surpass Hongkong Land.
With more money flowing into the company, it was time to expand aggressively.
Seeing Li Ka-shing's acquisition of Hutchison Whampoa,
Bao Yugang's acquisition of Wharf,
and Lin Haoran's acquisition of Hongkong Electric Group,
Kwok Tak Seng realized that slow, steady organic growth was no longer enough.
The best way to grow quickly was to merge and acquire other valuable companies.
Before Li Ka-shing bought Hutchison, Cheung Kong's comprehensive strength was still weaker than Sun Hung Kai's.
But after the acquisition,
public perception in Hong Kong was that Li Ka-shing had surpassed Kwok Tak Seng.
This stung Kwok deeply.
Not willing to admit defeat, he resolved to find a way to outpace Li Ka-shing and his other old rivals.
Thus, he began scouting potential acquisition targets — and soon, Kowloon Motor Bus caught his eye.
It wasn't because he valued the bus transportation business itself.
Making big profits from bus operations was difficult.
Like the electricity sector, Hong Kong's bus services were monopolized public utilities.
In Hong Kong Island, China Motor Bus held the monopoly;
in Kowloon, it was Kowloon Motor Bus.
It sounded ideal — no competitors — but in reality,
strict regulations limited their profitability.
The Hong Kong government imposed a profit cap:
both China Motor Bus and Kowloon Motor Bus were prohibited from earning profits exceeding 15% of their net asset value annually.
Any excess had to be transferred into a development fund.
If they earned less than 15%, they could withdraw from the fund to make up the shortfall.
This mechanism greatly restricted how much bus companies could earn.
Thus, Kwok wasn't interested in Kowloon Motor Bus's transportation revenues.
The real reason?
Land.
Lots of valuable land.
Over the decades, Kowloon Motor Bus had acquired massive amounts of cheap land for bus depots and parking lots.
Not only in the outskirts of Kowloon but also prime city areas like Tsim Sha Tsui, Hung Hom, Mong Kok, and Yau Ma Tei.
They even expanded to Hong Kong Island after the Cross-Harbour Tunnel opened,
buying plots to set up more bus depots and parking lots.
In the 1960s and 70s, land in the suburbs was cheap.
But now, those "suburbs" had turned into prime city centers.
The value of their land had skyrocketed.
Thus, the real treasure hidden inside Kowloon Motor Bus wasn't the buses —
it was their vast, undervalued land assets.
Like many old British firms, Kowloon Motor Bus's market capitalization was far below the real value of its assets.
And Kwok Tak Seng wanted that land.
As a real estate tycoon,
if he could take control of Kowloon Motor Bus,
he could slowly exploit their land through joint ventures, redevelopments, or outright sales.
Eventually, all that land would essentially become part of Sun Hung Kai's portfolio.
Interestingly, Lin Haoran had exactly the same idea.
He too targeted Kowloon Motor Bus for its land.
If those properties could be developed by Wanan Real Estate,
Lin Haoran would reap massive benefits.
"How much of Kowloon Motor Bus's shares have we acquired?" Kwok asked after hearing the securities manager's report.
"We currently hold 5.32%," the manager replied.
"The progress is too slow," Kwok frowned.
Sun Hung Kai's profits had ballooned in recent years, giving Kwok plenty of ammunition for acquisitions.
Flush with cash, he wanted to speed things up.
"Boss, we've only been absorbing shares for two weeks.
Given the circumstances, the pace isn't bad.
For some reason, Kowloon Motor Bus's stock turnover is unusually high —
comparable to some real estate stocks."
The manager continued:
"Today, we ramped up our buying.
If we maintain today's pace,
I estimate we could secretly accumulate over 30% ownership within three months.
By then, we could officially launch a takeover bid."
"Three months…" Kwok drummed his fingers on the desk.
The manager hesitated, then added,
"Boss, I've analyzed the recent trading volumes.
I suspect other consortiums are also eyeing Kowloon Motor Bus.
If that's true, it may not be as easy as we hope."
"Do you have suspects?" Kwok asked.
"Yes, Eagle Group.
I heard a rumor earlier this year that Eagle Group was interested in acquiring either China Motor Bus or Kowloon Motor Bus.
I'm not sure if they've acted yet," the manager replied.
Kwok's frown deepened.
Eagle Group was no small fry —
among Chinese real estate tycoons, it ranked fifth,
behind Cheung Kong, Sun Hung Kai, New World, and the rising Carrian Group.
He couldn't afford to underestimate them.
Still, if the rival was only Eagle Group,
Kwok wasn't too worried.
Sun Hung Kai's strength far surpassed Eagle Group.
"The situation must be investigated thoroughly.
Meanwhile, continue absorbing shares tomorrow," Kwok ordered.
Once the meeting ended,
he instructed his intelligence team to dig deeper.
Big bosses like Kwok always had private intelligence networks — some better than others.
...
The next day,
at Huanyu Investment in Wanqing Tower,
Lin Haoran received a call from Cui Zilong.
"Boss, based on our investigation, we confirmed that Sun Hung Kai is indeed secretly acquiring Kowloon Motor Bus shares.
Moreover, we found an unexpected twist:
Eagle Group is also involved."
Cui Zilong continued,
"Through a mid-level Sun Hung Kai securities manager,
we confirmed their movements.
As for Eagle Group,
it's their chairman's son, Lo Yuk Sui, leading the operation.
He's a finance expert who recently consolidated their hotel businesses into Regal Hotels Group, preparing for a future IPO."
Intelligence work was straightforward when you had clues and were willing to spend money.
Without leads, it would have been nearly impossible to uncover.
Learning that there were two competitors didn't surprise Lin Haoran.
He had anticipated it.
The key was,
both Sun Hung Kai and Eagle Group had only recently entered the game,
whereas Huanyu Investment had a significant head start and ample funds.
In such circumstances,
if Lin Haoran still failed to win,
he could only blame bad luck.
At 4:10 p.m., Su Zhixue handed another report to Lin Haoran.
"Boss, today's trading was tougher.
Even though we increased our absorption efforts and pulled in two reinforcements from the Jardines project team,
we only managed to capture about 36% of today's transactions.
As of today, we hold 24.58% of Kowloon Motor Bus shares."
"The opponent's buying strength is clearly increasing.
If this continues, it will not only slow our takeover progress
but also push up our costs significantly," Su Zhixue said worriedly.
Indeed, Sun Hung Kai's financial firepower was not to be underestimated.
Kwok Tak Seng was one of Hong Kong's leading tycoons.
Securing Kowloon Motor Bus wouldn't be easy.
Lin Haoran pondered carefully.
Compared to Jardines or Hongkong Land,
Kowloon Motor Bus wasn't expensive.
Still, if the stock price kept surging due to a bidding war,
it would no longer be worth it.
When Huanyu started buying in February,
Kowloon Motor Bus's total market cap was just over HKD 500 million.
In only three months,
it had soared to over HKD 700 million.
If Eagle Group, Sun Hung Kai, and Huanyu Investment continued competing,
the stock price might skyrocket uncontrollably.
That was unacceptable.
Thus — their ambitions toward Kowloon Motor Bus had to be stopped!