Chapter 172: The Conditions for Equity Financing into Land Holdings
"Mr. Lin, I wonder what conditions you have? We came with great sincerity. Cooperation is achieved through discussion, and I believe that after negotiations, both sides will definitely reach an agreement," Bowers said patiently, passing the question to Lin Haoran. Conditions? Lin Haoran frowned slightly. Bowers' sudden visit and his intentions had only just been made clear; he hadn't yet given serious thought to it. So, for the moment, it was difficult for him to propose concrete terms.
"Mr. Bowers, are you busy today?" Lin Haoran asked instead of answering directly. Although he wasn't sure what Lin Haoran meant, Bowers still answered truthfully, "My most important task today is to come and negotiate this cooperation with Hongkong Electric Holdings. This decision was made after discussions with Mr. Percy Niblett and the entire Land Holdings board. We sincerely hope to achieve cooperation with you. Land Holdings has nearly a century of experience in real estate development and the best marketing resources in Hong Kong. If Hongkong Electric agrees to cooperate with us, you definitely won't regret it. This would be a mutually beneficial arrangement."
Clearly, Bowers was still trying to persuade Lin Haoran to choose Land Holdings as a partner. After all, the land at the old North Point Power Plant site was simply too valuable for Land Holdings to give up easily. Aside from stable income from electricity sales, that plot was Hongkong Electric's most valuable asset. At current market prices, it was already worth around HK$1 billion, and by the end of the year, HK$2 billion would be realistic.
Thus, Land Holdings was desperate not to miss out entirely. Their failed attempt to acquire Hongkong Electric only made them even more eager to find a way to profit from the site.
Since the 1980s began, Land Holdings had seemingly regained confidence in Hong Kong's future. Under Bowers' leadership, they shifted from being a conservative, cautious investor to an active, aggressive developer. They were working on over seventy real estate projects with numerous partners like Far East Development, Carrian Group, Hang Lung Properties, Cheung Kong Holdings, and Hongkong and Yaumati Ferry Company.
So it was perfectly normal for Land Holdings to come knocking, hoping to jointly develop the North Point site. It wasn't just them either; many other developers, including Cheung Kong Holdings, had shown great interest.
"Since Mr. Bowers is not busy today, please rest here for a moment. I would like to discuss this matter with our Executive Director, Mr. Chen Shoulin, before making a decision. Would that be acceptable?" Lin Haoran said with a smile. "Of course, I can wait," Bowers agreed readily.
A successful cooperation would mean a major project for Land Holdings. If they developed the site successfully, it would be worth dozens of smaller projects combined, bringing profits of several hundred million Hong Kong dollars at least. In fact, Bowers and Percy Niblett even believed that if the property boom continued, profits of over HK$1 billion could be realized.
They just didn't know that in two years, Hong Kong's property market would crash. At that time, breaking even would be considered lucky.
While Bowers daydreamed about potential profits, Lin Haoran and Chen Shoulin stepped into the general manager's office, closed the door, and sat down.
"Mr. Chen, as a senior in the business world, what do you think we should ask for to maximize Hongkong Electric's benefits?" Lin Haoran asked, hoping to get a better idea from him. Chen Shoulin, with his rich business experience, surely had his own ideas.
"Boss, I actually thought about this back when Mr. Percy Niblett discussed it with me. In my opinion, cooperating with Land Holdings is not a problem. They have top-notch development capabilities, and after the project is completed, we can leverage their marketing channels to sell quickly. However, given how much interest there is in the North Point site, we should definitely demand more. I have two ideas: First, raise the land valuation. Instead of valuing it at HK$1 billion, we set it at HK$1.2 billion. Land Holdings would then need to invest HK$600 million instead of HK$500 million. This would allow us to make an extra HK$100 million, and I believe they could accept it. After all, the profit potential of this land is huge, which is why so many companies are interested."
"Second," Chen continued, "since the Hong Kong property market is booming, and Land Holdings itself has a very bright future — as it is Hong Kong's biggest property firm — we could propose an equity financing arrangement. Instead of simply injecting cash, Land Holdings would inject shares equivalent to HK$500 million. Based on Land Holdings' current valuation of HK$7.8 billion, HK$500 million would represent about 6.4% of their shares. This way, Hongkong Electric would become a shareholder in Land Holdings. We wouldn't just profit from the North Point development — we would also benefit from Land Holdings' long-term success."
At present, no one foresaw the property crash coming in two years. Even tycoons like Li Jiacheng hadn't noticed any signs yet. They wouldn't realize until much later, when cracks began appearing at the peak of the boom.
Lin Haoran, aware of the looming crisis, nevertheless found Chen Shoulin's second proposal quite appealing. After all, absorbing 30% of Land Holdings' shares through market purchases wouldn't be easy. As more retail investors cashed out, the pool of available shares would shrink, making accumulation more difficult.
If Hongkong Electric could hold a stake in Land Holdings via this project, it would be a huge strategic advantage for Lin Haoran. Although Hongkong Electric wasn't fully privatized, Lin Haoran controlled it. Thus, any shares held by Hongkong Electric were effectively his.
If Hongkong Electric successfully became a major shareholder of Land Holdings, Lin Haoran could one day leverage that to seize full control.
In Hong Kong, it was normal for companies to cross-hold shares. For instance, HSBC and Jardine Matheson held stakes in each other, with Percy Niblett himself serving on HSBC's board. Among top firms, such complicated interlocking holdings were common, especially among British
In the eyes of these British financial groups, as long as the shares held by the other party didn't threaten their primary controlling stake, it wasn't a bad thing. In fact, it could strengthen cooperation between both sides. "Mr. Chen, I think your second idea is excellent. Hongkong Electric Holdings doesn't lack capital now, and there's no need to simply take a few hundred million in cash. Becoming a shareholder in Land Holdings and joining their board would be a great opportunity. Land Holdings owns numerous commercial properties in Central, all of which are leased and never sold, making it a golden goose laying golden eggs. If they weren't constantly expanding and reinvesting their profits into new projects — even borrowing from banks — Land Holdings could already enjoy huge annual profits purely from rental income. In the short term, cash is more attractive, but in the long run, holding Land Holdings' shares is a far better strategy," Lin Haoran shared his thoughts.
Hongkong Electric's cash flow was strong, and profits were substantial. When Lin Haoran took control, the company hadn't issued a dividend for over a year. While some profits had been reinvested, a lot of cash remained in the company. After taking over, Lin Haoran discovered that Hongkong Electric's bank accounts held HK$392 million — not a small amount. If he wanted, he could immediately issue dividends and, with his 49.9% stake, pocket nearly HK$200 million. However, he wasn't short of that money and had no intention to do so yet.
Moreover, Lin Haoran wouldn't explain to Chen Shoulin that his real purpose in wanting Hongkong Electric to hold Land Holdings shares was to lay the groundwork for a future takeover. Only he and Su Zhixue knew the true plan. Even Huanyu Investment's trading team, who were absorbing Land Holdings' shares, thought Lin Haoran merely wanted to profit from stock trades — just like when he had absorbed Wheelock shares and flipped them for big profits.
These traders never imagined their boss had ambitions to swallow an entire giant like Land Holdings — a company two to three times larger than Hongkong Electric by market value. Acquiring Hongkong Electric had already been a miracle. Going after Land Holdings? Unthinkable!
"Now the concern is whether they'll agree to this proposal. After all, based on their current valuation, a 6.4% shareholding is quite significant. From what I know, Jardine Matheson and Jardine Securities only hold around 20% of Land Holdings' shares," Chen Shoulin said thoughtfully. Lin Haoran nodded. It was very likely that Jardine was worried about losing Land Holdings after seeing Wheelock forcibly taken by Pao Yue-Kong. That's why Percy Niblett later initiated a cross-shareholding plan between Jardine and Land Holdings to strengthen mutual control.
"No matter what, we should try. From Bowers' words, it's clear they are very eager to secure a role in developing the North Point site. I doubt they'll give up easily," Lin Haoran said with a smile.
For Lin Haoran, Land Holdings' proposal to cooperate was unexpected. If they accepted his terms, great — he would gain an ally inside Land Holdings. If not, he would simply let Wan'an Group develop the North Point project alone and reap even greater profits internally.
After further discussion, the two men returned to the reception room. There, Bowers sat waiting, occasionally frowning as if pondering a thorny issue.
"Mr. Bowers, after discussions between myself and Mr. Chen, we have decided to give Land Holdings a cooperation opportunity. However, the terms will not be exactly as you proposed. We hope Land Holdings will finance the project through equity — in other words, by injecting shares," Chen Shoulin explained their proposal in full.
Bowers was visibly surprised. He hadn't expected such a demand. But after a moment, he answered, "Mr. Lin, Mr. Chen, this matter is significant. I cannot decide alone. I must report back to Mr. Percy Niblett and our board before giving you an official response."
Bowers personally had no strong objection to the proposal. From Land Holdings' perspective, it was acceptable. However, the final decision rested with Jardine Matheson, which controlled Land Holdings behind the scenes. This was especially sensitive after Wheelock's loss — Jardine had become extremely cautious about anything that could threaten their control over their subsidiaries.
Although it seemed unlikely that Hongkong Electric could ever take over Land Holdings, as the saying goes, better safe than sorry. Jardine was now highly vigilant.
"Alright, Mr. Bowers. Please go back and discuss it thoroughly. I'll await your response," Lin Haoran said with a smile.
For Lin Haoran, whether the cooperation succeeded or not, it was a win-win. If it succeeded, he would have an additional foothold inside Land Holdings. If it failed, he would simply let Wan'an Group handle the North Point project and keep even more profit for himself.
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