Chapter 181 Jardines Matheson Becomes a Competitor to Hong Kong Electric Again
Upon hearing that there was an important matter to report, Lin Haoran immediately became energized.
"What is it? Tell me in detail." He pulled out a chair in front of the desk, sat down, and asked curiously.
"A few years ago, our Hong Kong Electric Group and Jardines Matheson once planned to jointly acquire another historic publicly listed utility company—China Gas Company. We secretly absorbed a portion of its shares, hoping to fully acquire it through a combination of cash and stock.
However, at that time, it faced strong opposition from the China Gas board of directors. Since the board controlled a majority of the shares, even though Jardines Matheson and Hong Kong Electric Group had ample funds, without the board's consent, they couldn't proceed with the acquisition. Ultimately, the acquisition failed, and it caused a huge stir back then. Nevertheless, we retained about 7.2% of China Gas's total shares, which we acquired through the secondary market, and we have not sold these shares since.
Just this afternoon, Mr. Nobby Jamieson from Jardines Matheson called me, hoping that we could sell our shares of China Gas to them. They plan to launch a fierce acquisition attempt. I need to know your opinion on this, boss.
China Gas Company, like us, has stable revenue. Due to its monopoly status as a listed utility company in Hong Kong, the entire Hong Kong market is supplied by them. Over the years we've held the shares, they have paid dividends either annually or biennially. In five years, we've already received nearly ten million Hong Kong dollars in dividends.
Therefore, I do not recommend selling the shares to Jardines Matheson. I believe this investment is more profitable than most, representing a high-quality investment project without any loss risk. Even if they offer a premium, I still suggest we don't sell. Continuing to cooperate in acquisition might be a good move instead." Chen Shoulin reported in detail.
A company like China Gas, which had not diversified like Hong Kong Electric Group nor expanded into external markets, had limited potential for massive growth. Its market was essentially fixed, but its revenue remained extremely stable. Even decades later, the company would still exist and continue generating substantial profits.
"Hong Kong Electric Group actually holds shares in China Gas Company and even once attempted to acquire it?" Lin Haoran was very surprised.
He truly didn't know about this matter.
Hong Kong Electric Group, Wharf Holdings, Hutchison Whampoa, Wheelock and Company—these British-owned companies had all been involved in acquisition battles with tycoons like Li Jiacheng and Bao Yugang, and Lin Haoran had heard about those classic battles.
However, China Gas Company was much less well-known compared to these big British firms, so it was normal that Lin Haoran wasn't very familiar with it.
Moreover, Lin Haoran's time at Hong Kong Electric Group had been too short, and he didn't visit often. Although he had tried to understand the company's situation, he hadn't had time to review all the information.
He had mainly checked the most critical data, such as how much capital the group still had and its monthly revenues—these were his priorities.
Unexpectedly, Hong Kong Electric Group had given him another pleasant surprise.
After all, he was also secretly accumulating shares of China Gas Company, intending to acquire this high-quality publicly listed utility company in the future.
A 7.2% shareholding was not a small amount.
The acquisition event involving Hong Kong Electric Group and Jardines Matheson happened in 1975, a time when Lin Haoran hadn't yet transmigrated, and the original Lin Haoran was still studying in the United Kingdom. Naturally, he had no memory of it.
After Hong Kong Electric Group and Jardines Matheson failed to acquire China Gas Company, Hong Kong Electric retaliated.
They launched campaigns in new residential areas offering free electric water heaters. This not only increased electricity consumption among residents but also aimed to hurt China Gas by reducing gas usage.
These instant water heaters had a power rating of 8 kilowatts, consuming about 18 kWh per hour. Although they were given away for free, Hong Kong Electric didn't lose money—they still collected a deposit. Hence the saying "the wool comes from the sheep" applied perfectly.
Facts proved that Hong Kong Electric's strategy was highly clever: not only did they retaliate against China Gas Company, but they also significantly increased their own revenue.
Of course, the retaliation caused limited damage to China Gas Company.
It is worth mentioning that the China Gas Company board initially refused the acquisition offer—whether cash or stock—giving no room for Jardines Matheson or Hong Kong Electric Group to negotiate because China Gas was controlled by a Chinese capital consortium. These Chinese board members had backbone and refused to be acquired by British-owned companies.
Now, surprisingly, Jardines Matheson had not given up on acquiring China Gas Company and was once again eyeing it. Even Chen Shoulin hadn't expected this.
"Boss, here's the thing: although back then the high board shareholding prevented the acquisition, times have changed. After five or six years, the shareholding structure has shifted, and the board doesn't control as many shares as before.
That's why Nobby Jamieson sees another opportunity to acquire China Gas Company and has approached us. If we sell our 7.2% stake, it would give Jardines Matheson a significant boost." Chen Shoulin continued explaining.
Lin Haoran nodded. Through Chen Shoulin's explanation, he gradually understood the history and the current situation.
"We must not agree, Chairman Chen. Honestly, I'm also interested in acquiring China Gas Company. I've reviewed its situation somewhat, and it truly is a top-quality listed company. It's just that their ambition isn't very high—they lack desire for market expansion and diversification. Their income source is mainly gas sales. Tell me, could we acquire it ourselves?" Lin Haoran smiled and asked.
China Gas Company had long been labeled as a must-acquire target for Lin Haoran. Since Jardines Matheson was now eyeing it, he naturally would not agree to let them move first.
"Boss, our company currently has ample funds. Aside from a portion reserved for joint development with Jardines Matheson on the North Point project, there's still a lot of usable capital. Under normal circumstances, if Jardines Matheson weren't interfering, we would have the capability to acquire China Gas Company. However, under the current situation, it will be quite difficult because we don't know how many shares Jardines Matheson controls. We might not be able to outcompete them.
Jardines Matheson's strength far exceeds that of Hong Kong Electric Group. Their British backers are some of the most famous aristocratic families. Although I'm not sure how many shares Jardines Matheson currently holds, it is definitely more than we do—likely exceeding 10%. Judging from the phone conversation, they plan to continue absorbing shares from the secondary market, aiming to control this Chinese-owned listed company." Chen Shoulin shook his head.
"Then tell me, if we want to acquire China Gas Company, how could we beat Jardines Matheson?" Lin Haoran asked.
"Boss, the best way is to win the support of China Gas Company's board. In recent years, due to stock price surges, some Chinese shareholders sold their stakes, weakening the proportion of Chinese ownership. Jardines Matheson plans to exploit this gap.
If they already control over 10% of the shares and successfully acquire our 7.2%, their stake would exceed 20%. If they then aggressively buy on the secondary market, even the board may not be able to maintain control.
Without solid control, there's always the risk of a hostile takeover." Chen Shoulin answered.
Lin Haoran nodded. This method proposed by Chen Shoulin was probably the best option for successfully acquiring China Gas Company.
This was also why Lin Haoran insisted on maintaining 49.9% control over Hong Kong Electric Group: to ensure no one could threaten his control even if they had more capital.
Judging from Huanyu Investment Company's activities in accumulating China Gas shares, it seemed Jardines Matheson hadn't yet launched a full-scale attack. They were first trying to buy Hong Kong Electric's 7.2% stake before using overwhelming financial power to seize control.
The reason Jardines Matheson approached Hong Kong Electric now was because they thought, after the recent cooperation in the North Point project, relations were good enough that Hong Kong Electric would sell.
However, this time, Nobby Jamieson had miscalculated.
Cooperation in one area didn't mean giving up independent development strategies. No enterprise would sacrifice its own plans just to please a partner.
"Do you know the chairman of China Gas Company?" Lin Haoran suddenly asked.
"Boss, I'm familiar with Chairman Li Mingze and key director Li Guobao. Back in 1975, I interacted with them several times because of my Chinese identity. I wasn't yet Chairman of Hong Kong Electric Group then—just the general manager.
But they believed that although I was a general manager with some decision-making power, I was merely a professional manager without any ownership, and Hong Kong Electric Group was still essentially a British company. Thus, they refused to negotiate.
Despite my efforts to persuade them, the acquisition talks ultimately failed!" Chen Shoulin recalled, seemingly still brooding over that defeat.
"To be honest, it's a good thing you didn't succeed back then. Otherwise, China Gas Company would already be controlled by Jardines Matheson today." Lin Haoran smiled.
Even though it had been a joint acquisition attempt, it was obvious that Jardines Matheson would have eventually dominated. Five years ago, Jardines Matheson was at its peak, controlling both Hongkong Land and Wharf Holdings, with a combined market cap rivaling even HSBC.
Although Jardines Matheson had since weakened after losing Wharf Holdings, the saying "a starved camel is still bigger than a horse" applied. They remained far stronger than Hong Kong Electric Group.
The gap between top-tier companies was enormous.
"Boss, I'll reply to Mr. Nobby Jamieson then. We'll reject their offer and let them know that Hong Kong Electric Group also intends to acquire China Gas Company!" Chen Shoulin said.
"Good, reply like that. As for the acquisition itself, we'll discuss the best strategy separately." Lin Haoran nodded.
Upon learning that Hong Kong Electric Group held 7.2% of China Gas Company, Lin Haoran decided to proceed openly: using Hong Kong Electric Group's identity to acquire China Gas Company.
Meanwhile, Huanyu Investment Company would continue quietly absorbing shares on the stock market, ready to assist Hong Kong Electric Group in taking over China Gas Company at the right moment.
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