"Could it be Wheelock?"
Li Yekong thought for a moment and said:
"A few years ago, during the oil crisis, Wheelock's profitability declined year after year. Its chairman, John Madden, lost interest in continuing. Back in October 1976, he even contacted Jardine Matheson, hoping that Jardines and Hongkong Land would jointly acquire Wheelock. Later, Hutchison International — with HSBC's backing — also joined the attempted acquisition. But in the end, the deal fell through."
"Even so, no one can guarantee that John Madden isn't again considering selling Wheelock. Lin Baichen could easily have contacted him with HSBC acting as the intermediary."
Michael Mak added:
"Wheelock's earnings suffered badly in those years, but with Hong Kong's economic rebound in the past year or two, Wheelock has benefited from the booming property market. Its market value has recovered significantly, and its earnings are not bad. There's no reason for John Madden to sell now."
Li Ka-shing, however, shook his head slightly.
"I haven't dealt with John Madden many times, but I understand him. He's never been optimistic about Hong Kong's long-term economic outlook. Now that Wheelock's market value has recovered, as long as the price is right, he absolutely wouldn't mind selling his shares."
Michael Mak raised his eyebrows.
"So that means…it's Wheelock?"
"No, we still can't be sure."
Li Ka-shing waved his hand.
"You mentioning Wheelock reminded me of something: back in 1975, HSBC invested HK$150 million to take a stake in Hutchison International — now the reorganized Hutchison Whampoa. HSBC currently holds about 20% of Hutchison Whampoa. With Bao Yugang's help, Lin Baichen could have contacted Sir William Purves (Shen Daban), and purchased Hutchison Whampoa shares from him. That would put Lin's shareholding on par with — or above — the Keswick family's."
"Hutchison Whampoa, huh…"
Li Yekong nodded, still puzzled.
"I truly don't understand where Lin Baichen got that much money. Sure, his Galaxy Game Company is profitable, but the money he earned should have been used to acquire Asia Television. Other than that, he should have only had the HK$300 million loan from Standard Chartered. That's barely enough to fight for Wharf, let alone acquire Wheelock or Hutchison Whampoa — both worth over HK$2 billion."
Michael Mak agreed:
"And HSBC didn't lend him anything. If any other bank had given him a huge loan, we would've heard rumors."
Li Ka-shing said calmly:
"You're forgetting the banks outside Hong Kong. His company exports arcade machines; dealing with overseas banks is perfectly normal."
At first Li Ka-shing couldn't figure it out either. But after eliminating all Hong Kong banks, the only explanation left was that Lin had borrowed from foreign banks — and that was beyond Li Ka-shing's ability to investigate.
"Now it doesn't matter where he got his loans or what collateral he used. What's important is: he must have a massive amount of capital. Otherwise, he wouldn't have dared to attempt acquiring Wharf. Even if he doesn't have HK$1 billion, he must have at least HK$500 million."
"Since he clearly won't be competing with Bao Yugang for Wharf anymore — and my original plan failed — we need to think about our next move. We need to find a way to profit from this situation."
"What we must do is figure out which company Lin Baichen is targeting. Then we secretly buy shares in advance and make money from the surge."
Li Yekong hesitated.
"Mr. Li, you really don't want to buy into Wharf? Even if Lin Baichen and Bao Yugang aren't fighting over it, Bao is bound to clash with Jardine Matheson. Buying Wharf shares now is practically guaranteed profit."
"No."
Li Ka-shing's tone hardened.
"I sold part of my Wharf shares to Bao Yugang not just as a transaction, but also as a gesture — he helped buy the Cheung Kong shares back from Lin Baichen. If I now buy Wharf shares again and compete with Bao for stock, that would offend him. I won't damage that relationship for short-term gain."
"Lin Baichen is different. He offended me, and I offended him. If I buy into the company he's trying to acquire, even if he finds out, I don't care. We're already enemies."
Li Ka-shing truly wasn't afraid of offending Lin Baichen. Despite Lin seeming to have more wealth at the moment, Lin was young, newly rich, and lacked connections. Li Ka-shing wasn't afraid of competing with him.
Bao Yugang was a different matter — he was Hong Kong's richest man at the time, with far more connections than Li Ka-shing. Li Ka-shing had no desire to offend Bao; in fact, he hoped to use this opportunity to build a stronger relationship with him.
Michael Mak nodded.
"In that case, we'll keep investigating."
"Yes. The moment Lin Baichen signs anything with HSBC, word will spread. Whoever learns the news first will make money."
Li Ka-shing nodded, though in his heart he only hoped that Lin's acquisition target was not Hutchison Whampoa — because Hutchison, like Wharf, was also a company he wanted to acquire. Both held major high-quality land reserves. If someone else bought them first, Li Ka-shing would lose his chance.
If he had the money, he would already be trying to acquire Hutchison Whampoa. But he didn't — so for now, wanting was all he could do.
—
While Li Ka-shing was busy investigating Lin Baichen's next target, Lin — shortly after signing with HSBC — met with Bao Yugang. He intended to sell both his Wharf shares and his Changjiang Industries shares to Bao.
Because Bao had helped him acquire Hutchison Whampoa shares from HSBC, Lin couldn't drive a hard bargain on the Wharf shares. When Bao offered the originally agreed HK$20 per share, Lin accepted immediately.
Lin owned 8.5 million Wharf shares, which he sold for HK$170 million.
His cost had been around HK$25 million — so he earned nearly HK$150 million, plus secured Bao's help in obtaining the Hutchison Whampoa stake. A huge win.
As for Changjiang Industries:
Lin kept 5%, or 2 million shares, and sold 5.9 million shares at HK$20 each, earning HK$118 million.
That meant the 2 million shares he kept effectively cost him only HK$22 million.
Changjiang Industries' stock price had risen to HK$18.20 due to Lin's earlier buying. At that price, Lin's profit was only around HK$10 million.
On the surface, Bao Yugang had paid premiums for both companies' shares — but the Cheung Kong shares were only about 10% above market price, and the Wharf shares, though over 50% above cost, were still relatively cheap given the circumstances.