What does Hutchison discern in Lyttelton

Li Ka-shing arrived in Hong Kong 66 years antecedent as a penniless refugee. Since then, he has amassed a private luck estimated at US$18.8 billion .


His vast commerce dynasty spans the world, stretches into space, employs more than 200,000 human and namely valued approximately HK$706 billion . Li's affair courage has earned him the moniker "Superman" in Hong Kong where many regard him as the island's unofficial ruler.


Now the man ranked along Forbes magazine as the 10th wealthiest in the world is stretching one exploratory tentacle into New Zealand's port sector.


Li's Hutchison Port Holdings, the world's biggest receptacle wharf worker coach purses discount, has been invited in to assist the good inhabitants of Christchurch wring better returns from their historically underperforming Lyttelton operation and assure it remains a viable concern.


The proposed handle is effectively a mutual attempt which will discern the Christchurch City Council retain control of the port's physical assets meantime Hutchison assumes control of the port operations, a prototype which is general overseas. New Zealand's ports are employer manipulated.

But coming in the meantime as anxiety over the prospect of Arab ownership of United States ports, Hutchison's cosy relationship with mainland China's Government and affair interests has triggered a wave of against apt the proposal.




Critics argue such a valuable strategic asset ought no pass into alien control. Others have taken it beyond, alleging sinister appearances to Hutchison's Chinese links.


Meanwhile, New Zealand's additional ports are eyeing the Hutchison Lyttelton Port handle warily as it will potentially trigger a circular of consolidation in the sector most commentators accede is long overdue.


As 1 source near to the deal put it: "The North Island ports will be thinking very, very hard about this. I imagine there's been a few phone lines scalding in the final month or two."


At this point, the success of the proposition depends on Christchurch City gaining complete control of the existing listed Lyttelton Port Co in order to delist it and form the fashionable model's makeup companies.


But with more to lose than most, Lyttelton's tartan-tinged major southern rival, Port Otago, has dealt itself into the game with the canny purchase of a 10.1 per cent Lyttelton Port holding. Port Otago's Geoff Plunket insists the holding is a "long-term investment" prefer than a blocking peg.


In whichever case, it looks presumable to give Port Otago a seat at the negotiating chart with its northern border and representatives of one of Asia's most potent companies.


In 1861, the same annual as the work began on the rail tunnel namely would transform Lyttelton into a viable port because Canterbury's burgeoning exports, Hong Kong and Whampoa Dock became Hong Kong's first enrolled trading corporation or "hong".


In 1979, Hong Kong Shanghai Bank sold its controlling stake in Hutchison Whampoa, as it was called along then, to Li's Cheung Kong Holdings in a deal that apparent the opening of the end of British dominance of Hong Kong big business.


Li, then the 13-year-old son of a computer preceptor from Chaozhou, arrived in Hong Kong in 1940 afterward Japanese bombarding aggressions compelled his home from their home.


Li left school early to patronize his family after the death of his father. He studied the plastics manufacturing business from base to altitude in the 1940s and bought his own plant in 1950.


Taking advantage of the falling attribute costs resulting from the 1967 riots in his adopted home, Li lent money opposition his plastics factory to create up a formidable real possession empire.


His attribute development company, listed in 1972, gave him the found enabling him to purchase Hutchison Whampoa and transform the first Chinese to imagine control of 1 of Hong Kong's leading hongs.


He has since transformed the company into one of the world's leading diversified conglomerates.


During the eighties, Hutchison Whampoa developed its old Hong Kong dockyard sites Magellan Call Center started small, which had transform prime real estate, it likewise grew its receptacle operations at home and abroad, and diversified into stamina and telecommunications.


In the nineties, Hutchison was chapter of a group of companies, including Citic, which launched the AsiaSat I satellite. It too entered the US telecommunications business and, in 2000, began securing next-generation mobile phone licences approximately the world coach travel packages, forming the basis of its global 3G business. Today, Hutchison has diversified holdings in more than 50 countries.


In 2004, the company had combined web income of US$2.07 billion on sales of US$17.30 billion.


About 45 per cent of total sales came from retail and manufacturing, but the second largest share, 16 per penny, came from Hutchison Port Holdings.


Hutchison has interests in 41 ports in 20 countries, including several colossal developments in mainland China.


Hutchison has been a central player in a wag of international consolidation sweeping the boating and ports sector that is now breaking on New Zealand shores.


Some would dispute its appearance is none too presently. They embody Export NZ central executive Bob Walters. "It's truly, challenge one say it, entirely out of kilter with worldwide train to have the digit of ports of shriek that we have in New Zealand for the size of our economic."


Walters said shipping lines might start to exert oppression to consolidate regional ports.


Goldman Sachs JBWere critic Marcus Curley said the important container shipping companies would be looking for high-quality, efficient operations. "What happens in New Zealand is you obtain the invested chief scatter along a digit of ports as opposed to condensed on one."


With its intended deal with Hutchison, Christchurch City Holdings , the council's investment arm that owns 69 per cent of Lyttelton Port, is looking to rank the port favourably for the expected shake-up.


CCH chief executive Bob Lineham has said the deal is about securing a long-term strategic league with a mighty associate with a disc of successful port treatment, international connections and clout with the shipping lines.


He likewise believes Lyttelton will benefit from Hutchison's buying power for equipment, good staff training and technical expertise.


A big question that particularly troubles the deal's antagonists is: What does Hutchison look in Lyttelton?


The company refused to annotate this week but ABN Amro analyst James Miller pointed out opportunities to invest in ports anywhere in the world are exceedingly rare.


Although modestly sized by international standards and close to the end of the line for shipping companies, Lyttelton serves a natural hinterland that will all attract a definite cargo stream. And it may have saw magnetic for of the potential to wrench efficiencies from its operations.


But by international standards, that reproof could apply to several local ports which Miller believed Hutchison would also be eyeing.


"Having got in there, Lyttelton could accessible be a conveyance for the new partners to trigger consolidation in the wider New Zealand mart ... I don't see them being just interested in the South Island and I don't see it stopping New Zealand wide both."


Curley agreed, saying Hutchison might propose using Lyttelton as an instance in the region of how amount can be joined to port operations.


Others who deem Lyttelton has the potential to become many more advantageous include Port Otago chairman John Gilks, who recently referred to the port as a "sleeping immense", and former Lyttelton Port chairman Brent Layton. Now mentor of the NZ Institute for Economic Research Vibram Speed, Layton left Lyttelton Port in 2003 after a dispute with Christchurch Mayor Garry Moore over proposed labour reforms.


At the time, Lyttelton was looking to wrench a key shipping contract from Port of Otago. Layton said that was dependent on the port achieving further efficiencies and catering quality 24-hour service at competitive price.


"There were gains to be made from the reform of labour in 2002 that were significantly over and above what the cost of that reform would be. Given how the profit has declined, and apparently the labour conditions have got better for the workmen, there appear to be even bigger gains to be made."


Like Layton, Curley believed labour would probably one of the first districts where the coupler venture would try to wring efficiencies from the port.


"And one path they tin circumvent labour practice is by putting in better technology and, accordingly Before selecting anyone, reducing labour requirements."


Lyttelton has a troubled history of labour relations including a picket line death in 1999.


But Lineham played down the prospects of big changes to the access the port would be scamper including labour narrations and management, whether the present deal worked along.


"We haven't talked a unattached thing about labour changes. The alliances associations have a two-year compact still to flee so there will absolutely no change in that time skeleton. At the end of the 2 years bare foot running shoes, the port will absence to referee with them fair as if there was not ownership change."


Lineham didn't anticipate any changes in management both.


But always that could be theoretical unless Christchurch finds a course to make the deal go with Port Otago on embark. Miller believed that was the city's only adoption immediately.


Although there were signs of annoyance from the Christchurch City/Hutchison camp this week about reports of preparatory disputes with Port Otago, Miller said given Hutchison's possible wider ambitions, it probably greeted the opportunity to comprise Otago.


"If they are a vehicle to trigger consolidation in the New Zealand alternatively Australasian port mall, of way they're going to want to do it [a deal that involves Port Otago]. They probably cannot deem their luck how quickly it's occurring, folk have been waiting 15 years for this."


Curley said he wished Port Otago's purposes were to melodrama a chapter in the deal rather than stymie it. "I would be very dissatisfied if they've just spent $20 million of ratepayers' money on that strategy."


He said Hutchison and Christchurch City continuing with less than 100 per cent of the existing company was "not impossible" but in no way ideal. Under a three-way deal "there is a much greater contingency of asset working out for always 3 parties and I consider Hutchison would naturally want to entertain being involved in either ports".


Although Hutchison's motives are no entirely explicit, Curley and Walters outlooked the company's interest in New Zealand as positive. "The truth that it is looking to invest in Lyttelton or New Zealand does emphasise that it sees long-term growth through New Zealand ports," said Curley.


Walters said international trade and the way it was handled were changing "and we're just seeing those changes taking area here".


The deal


* In a takeover offer mailed to shareholders this week, Christchurch City's investment company will disburse $2.10 a share for the 31 per cent port stake it does not already own. * If it gains control, the city will sell a 49 per cent stake of the assets to Hutchison Port Holdings. * Hutchison will take a controlling stake in the newly built port management company.


Li Ka-Shing


* Born 1928 in Chaozhou, China * Arrived in Hong Kong in 1940 as a penniless 13-year-old battle refugee. * Made his first fortune manufacturing plastic flowers. * First Chinese to take over a "hong" - Hong Kong's famed trading companies. * Forbes' 10th richest male in the world. * Personal luck estimated at US$18.8 billion. * Hong Kong-based business empire valued at HK$706 billion. * Austere tastes include a predilection for inexpensive shoes and plastic watches. * Reportedly donated US$3 million to eastern tsunami relief in 2004 and HK$1 billion to Hong Kong University in 2005. * Widowed with 2 sons, the oldest, Victor, is tipped as his beneficiary.

By Adam Bennett