Hong Kong’s third-richest man brushes back succession theories: ‘If there’s no family member suitable, we can hire from the outside’

William of England
By William of England 11 Min Read

This month, his heir-apparent standing at the $26 billion family empire was thrown into doubt after his father Henry Cheng mentioned the conglomerate is still looking for a successor. 

“I’m still observing but I think it’s not so easy to identify such a person,” he mentioned in a tv interview, including that the family has a variety of operations and certified “members can be in charge of each business sector. If there’s no family member suitable, we can hire from the outside.”

The revelation from Hong Kong’s third-richest man raised eyebrows in a metropolis all-too aware of succession battles that usually erupt into public view and infrequently wind up in court docket. Former on line casino baron Stanley Ho and property tycoon Lo Ying Shek are simply two examples.

Henry’s feedback might imply that he hopes to have every family member lead a selected section, however not essentially decide one chief for the complete companies, mentioned Winnie Peng, director of the Roger King Center for Asian Family Business and Family Office at Hong Kong University of Science and Technology. She added that it’s usually a strategy of evolving from a family enterprise to a enterprise family. 

“When families are planning for succession, there could be potential sibling rivalry,” Peng mentioned. “This is something that they have to be really careful about.” But if the family members are harmonious and share the identical values, then this drawback can be averted, she mentioned.

Adding to the intrigue, Henry’s shut associates didn’t share particulars of the interview on the family-backed HOY TV along with his youngsters earlier than it aired, folks aware of the matter mentioned, requesting to not be named as a result of the matter is non-public. Adrian was conscious of the interview and its contents earlier than it was broadcast, a spokesperson mentioned, with out offering additional particulars. 

It had been extensively anticipated that Adrian, a 44-year-old graduate of Harvard University, would take over management of the family empire from his father. 

Adrian is presently chief govt officer of New World Development Co., the family’s flagship property enterprise; Sonia Cheng, Henry’s 43-year-old daughter, manages the Rosewood lodge and Chow Tai Fook Jewellery Group Ltd.; and Henry, 76, controls Chow Tai Fook Enterprises Ltd., the Chengs’ unlisted family funding automobile, with different family. Chow Tai Fook Enterprises holds main stakes in the clan’s primary companies, controlling New World and the Rosewood

As not too long ago as 2020, Adrian’s representatives have been distributing a bio that described him as “the heir to New World Development and Chow Tai Fook Enterprises, and the third generation leader of the $20.7 billion empire.” Sonia recognized herself as chief govt officer of Rosewood round the identical interval.

When requested about her father’s remarks throughout an earnings briefing, Sonia — additionally a Harvard grad — mentioned her function at the jeweler gives a transparent division of labor inside the firm, and all family members work collectively for the advantage of the agency. Conroy Cheng, Sonia’s cousin and vice chairman of the jeweler, mentioned “there’s no such thing” when requested about the chance of family infighting. New World declined to remark. Chow Tai Fook Enterprises didn’t reply to a request for remark.

The patriarch’s phrases matter in a succession course of that will quickly get underneath manner, particularly in a society that historically favors the eldest son. 

Henry took over the enterprise from his father Cheng Yu-tung, who constructed the conglomerate spanning procuring malls, casinos, lodges, and jewellery shops throughout Hong Kong and mainland China. The group’s holdings are amongst the signature properties in Hong Kong, from the New World Tower to the Victoria Dockside advanced. 

The sprawling empire has generated a fortune for Henry, whose internet value is sort of $21 billion, based on the Bloomberg Billionaires Index. 

Under Adrian, New World has expanded aggressively in China and is engaged on two of the greatest retail developments in Hong Kong, together with a $2.6 billion mall-office advanced subsequent to the airport. 

The technique has come at a value for New World, driving its debt load increased simply as rates of interest are hovering. The firm’s internet debt to fairness was 94% at the finish of June, based on Bloomberg Intelligence. That compares with 42% at rival Henderson Land Development Co., and Sun Hung Kai Properties Ltd.’s 18%.

“New World’s leverage is particularly high so there are more concerns for the company,” mentioned Patrick Wong, an analyst at Bloomberg Intelligence. “When the market sentiment is not good” firms like New World are particularly susceptible, he mentioned.

New World’s inventory has tumbled 47% this 12 months to a 20-year low, in contrast with a 14% drop in the benchmark Hang Seng Index. The developer’s $1.3 billion perpetual bonds bought in 2019 traded at simply 51 cents on the greenback. 

That’s even after the Cheng family funding automobile stepped in to alleviate the builder’s debt burden. Chow Tai Fook Enterprises Ltd. not too long ago purchased the majority shares of NWS Holdings Ltd., a subsidiary, producing $2.8 billion for New World. 

China’s property meltdown represents one other headwind for New World — and for Adrian. Its contracted gross sales from houses in the mainland accounted for nearly two-thirds of complete gross sales in the 12 months by way of June. By distinction, billionaire Li Ka-shing’s CK Asset Holdings Ltd. has trimmed its income from mainland China to simply 11%. 

“Weathering the challenging macro business environment is very important for both New World and Adrian Cheng,” mentioned Vincent Lam, chief funding officer at Hong Kong-based VL Asset Management. “If he can resolve the difficulties, it will solidify his position and future as a business leader.”

Adrian’s Gambit

Adrian has actually been on the transfer, modernizing his retail empire at a time when conventional malls are underneath siege. His imaginative and prescient consists of constructing his flagship K11 malls into premium locations with artwork and tradition. He’s bringing Louis Vuitton’s first ever fashion show to Hong Kong this month, and launched Asia’s largest MoMA design retailer.

His crown jewel K11 MUSEA’s foot site visitors elevated 67% on this first-half and mall gross sales elevated 84%, the firm mentioned.

Adrian’s logic is that the way forward for retail isn’t nearly promoting items, it’s about the expertise, particularly for the deep-pocketed customers he’s chasing. The firm’s high purchasers who spend greater than HK$300,000 a 12 months contributed HK$1.1 billion to gross sales final fiscal 12 months, and tripled consumption from pre-pandemic ranges, based on a spokesperson. 

And to underscore his legitimacy past overseeing cash from pals and family, Adrian’s non-public funding arm, C Capital, raised greater than $250 million for its Private Equity Fund III to back rising client and know-how companies. 

New World can also be promoting belongings to lift money and is reducing debt, making deleveraging the precedence, Chief Financial Officer Edward Lau mentioned in an interview. 

The firm plans to eliminate HK$6 billion in non-core belongings in the fiscal 12 months by way of June, after promoting HK$38 billion in the final three years. It additionally will search joint ventures to develop its 15 million sq. ft of land in Hong Kong’s Northern Metropolis to decrease prices, whereas some plots is also up on the market. It introduced plans on Nov. 23 to spend as a lot as $600 million to purchase back seven of its greenback bonds. 

“When there’s volatility in the market, whether it’s related to our company or not, we will buy more,” Lau mentioned.

Read extra: New World May Only Slightly Cut Debt Cost on Bond Buyback: React

Still, all the challenges dealing with Adrian are including heft to his father’s feedback about succession in a family the place a number of siblings play energetic roles. 

Sonia sits atop each the lodge enterprise and a publicly traded jewellery unit that has a market worth 3 times increased than New World. 

Their brothers Brian and Christopher function govt administrators of the family’s infrastructure arm NWS Holdings. Brian additionally sits on the board of New World. They even have two half-brothers. Henry’s nephew-in-law, Patrick Tsang, serves as chief govt officer of Chow Tai Fook Enterprises.

“I think it’s actually very encouraging to siblings other than simply Adrian Cheng,” Peng mentioned, referring to Henry’s feedback. “They would feel better that the father is quite inclusive to try to encourage them to join the family” enterprise, she mentioned. 

Share This Article
Leave a comment