More on Robert Kuok
The long march out of Asia
Legendary Malaysian-Chinese tycoon Robert Kuok keeps a low profile when it comes to press interviews. Malaysian TV scooped one in 1994 but it was two years before it was broadcast and subsequent requests have been brushed aside. Kuok’s handlers believe there is nothing wrong with keeping their 73-year-old boss under wraps. They point out that he built his empire through vision, tenacity, risk-taking and guanxi the connections that ease business transactions. A high public profile is neither necessary nor desirable. “Mystique helps,” says Joanne Watkins, one of his chief PR aides. “It creates great curiosity about him.”
What did come over in the TV interview was Kuok’s aversion to pompous or romantic descriptions of his business career. Asked reverently about his “sense of mission” as a great entrepreneur, he bluntly replied that “the most important thing was to make money”. And what was the secret of successful business leadership? “Like Genghis Khan in his best days, you have to share the spoils of victory,” he replied.
Over the last half-century, Kuok has diversified from a base of commodities trading into beverages, industrial manufacturing, real estate, shipping, investment and insurance, the media and perhaps most visibly hotels. His Shangri-La hotels form the biggest, most profitable chain of luxury lodgings in Asia.
Kuok’s publicly traded holdings are worth at least $7.5 billion. But some analysts reckon that’s only about a third of the total. “I’m confident that Kuok’s private holdings represent at least two-thirds of his wealth,” says John Mulcahy, managing director of WI Carr (Far East), in Hong Kong.
Kuok’s riches seem set to grow even more spectacularly as China prepares to take over in Hong Kong this year. Leading overseas Chinese businessmen have offered themselves sometimes with unseemly enthusiasm as intermediaries between the mainland authorities and their future subjects. Among these mega-millionaire supporters of Beijing none has higher standing with mainland officials than Kuok. He began investing heavily in China well before other overseas entrepreneurs, and went ahead with his projects even when political events turned the Beijing authorities into temporary pariahs abroad. Kuok had a neat line on this sort of situation in his TV interview. “A nimble businessman gets very wealthy when there are political developments,” he says. “In every crisis, big fortunes are made.”
“Back in the early 1980s,” says Mulcahy, “when other overseas Chinese businessmen were currying favour with Beijing by setting up foundations building hospitals and schools in their home towns, Kuok was already making real investments.” And when foreign entrepreneurs and visitors steered clear in the aftermath of the 1989 Tiananmen massacre, Kuok continued to finance his $480-million investment in Beijing’s World Trade Center, even though rooms in his luxury Shangri-La hotel at the Center’s hub were going begging for $30 a night. “The Chinese remember that,” says Robert Hutchinson, director of marketing for Shangri-La Hotels and Resorts. “Obviously, it gives him a competitive advantage.”
So it’s unsurprising that nobody gets better locations in China for his buildings than Kuok. By 1998, 14 Shangri-La hotels will be operating on the choicest downtown acreage in Beijing and Shanghai, as well as in lesser-known cities such as Dalian in the north-east and Wuhan to the west. Besides choice locations, Kuok has unparalleled political clout on his side. Other entrepreneurs worry that their projects in China will be slowed by bureaucratic inertia. “With Robert Kuok that isn’t a concern,” says Rohan Dalziell, investment analyst at ING Baring Securities (Hong Kong). “One of the beauties of investing in his Shangri-La hotels is the certainty they will be on as fast a track as possible.”
In China with this sort of influence a high-priority construction job backed by local and national authorities can literally be rammed through. As David Hayden, managing director of Shangri-La Hotels and Resorts, puts it: “It’s done by edict. ‘We’re relocating you tomorrow. The bulldozers will be through in the morning.’ You’d have to go back to Baron Haussmann in [19th-century] Paris to have seen that sort of thing in the west.”
Capitalizing on politics
Perhaps because a grateful Beijing government gives such precedence to his projects, Kuok claims not to have encountered the corruption that many businesspeople complain is endemic. “Wherever I go [in China],” he said in his TV interview, “I find the quality of leadership is getting better all the time the norms of integrity, the [numbers of] Chinese willing to serve their nation with no hope of personal gain.” Kuok went on to applaud the Chinese Communist party as “the backbone of the nation”, and predicted that as long as the party kept its unity, China would “only go from strength to strength”.
Politics has rarely been a barrier to Kuok’s business dealings. He was born in 1923 in Johor Baharu on the tip of the Malayan peninsula just over the strait from the island of Singapore. His father, an immigrant to the British colony from southern China’s Fujian province, was a comfortably-off commodities trader who sent all three of his sons to private, British-run schools. At Raffles College in Singapore, one of Kuok’s fellow students was Lee Kuan Yew, the future prime minister of Singapore.
Kuok’s education was curtailed by Japan’s invasion of Singapore in 1942, but he turned the occupation to his advantage by getting a job with a Mitsubishi trading company and learning fluent Japanese. After the war, Kuok remained aloof from the Malayan independence movement. When his younger brother, a prominent Communist guerrilla, was ambushed by British colonial forces in 1952 and fatally wounded, Kuok moved to London to master the intricacies of commodities trading.
It was as a commodities broker that Kuok first gained prominence. By the early 1970s he was known as the Sugar King because from time to time he controlled up to 10% of the world sugar market. His commercial skills took him into new ventures, including sugar plantations and refineries in Malaysia, where he enjoyed a virtual monopoly in the domestic market. He then diversified into palm oil, chemicals, shipping, real estate, and hotels throughout south-east Asia.
As a business strategy, Kuok has always swum deftly in the political mainstream. When, in the 1970s, the Malaysian government embarked on a long-term policy of affirmative action aimed at raising the incomes and living standards of the ethnic Malay majority (the bumiputra) to the levels of the more affluent Chinese minority, Kuok lent the policy his full support. Chinese businesses were forced to take on Malay partners and offer shares to other Malays at discounts. “A lot of Chinese took their money out of Malaysia,” recalls a former Kuok associate in Kuala Lumpur. “I know some of them thought Robert was being an opportunist. But that was selling him short. He really believed the only way Malaysia would become a stable country was if the Malay majority became prosperous. And he’s been proved right.”
Kuok’s open-mindedness toward Malay society goes beyond business. One of his daughters, Sue, who converted to Islam and is now known as Suraya Abdullah, is married to Rashid Hussain, owner of the Malaysian broking firm of the same name, who has become a billionaire in his own right.
By the 1970s, Kuok had shifted his business headquarters to Singapore, where Lee Kuan Yew was prime minister. But he maintained excellent political relations with the Kuala Lumpur government, which flourished after Mahathir Mohamad became Malaysia’s prime minister in 1981. Kuok on occasions offered himself as an intermediary between these two headstrong leaders, whose egos occasionally clashed. In 1986, for example, Kuok helped defuse a cross-border crisis by posting bail for a prominent Malaysian businessman jailed in Singapore on charges of stock-market manipulation. “Maybe only two or three other businessmen had the trust of both Mahathir and Lee it took to pull that off,” says Kuok’s former Kuala Lumpur associate.
Over the years, Kuok has widened his political contacts throughout south-east Asia. In Indonesia, thanks to his business partnerships with Liem Sioe Liong, that country’s wealthiest businessman, he has cemented his ties with president Suharto. Despite his friendship with late president Ferdinand Marcos he has also managed to impress subsequent Philippine governments through his willingness to invest in Manila hotel development even at low points in the real estate market.
Now Kuok is repeating the pattern in Myanmar. The poor image of that country’s military rulers has scared off many other potential foreign investors. Kuok, though, gambling that whatever government emerges there will not turn its back on him, has become the largest single investor in real estate development. His main projects are a 22-storey commercial complex and a Shangri-La hotel on the choicest downtown locations in Yangon, the capital. “Kuok takes long-term views and enormous risks,” says Shangri-La’s Hayden. Or as Kuok himself has put it: “Businessmen fish in troubled waters.”
As the most visible portion of Kuok’s empire, the Shangri-La hotels are a window on his business style and personal tastes. The first one was inaugurated in Singapore in 1971 but the real growth spurt came only after Kuok moved his main residence and headquarters to Hong Kong in 1979, presumably because he already had his eye on the China market. All but four of his 33 hotel properties have been completed in the last decade. By 2000, there should be 50 Shangri-La hotels, all in the Asia-Pacific region.
The Shangri-Las, which often win major awards, are an object of pride to many Asian businesspeople. “Kuok is the first non-Caucasian to build a five-star hotel chain in Asia,” says Sin-ming Shaw, a Hong Kong-based investment fund manager.
But the hotels reflect Kuok’s eclectic east-west vision more than Asian chauvinism. The name Shangri-La comes from the fictional earthly paradise in the Himalayas conjured up by British novelist James Hilton in his 1933 escapist novel Lost Horizon. Copies of the book, a favourite of Kuok’s in his youth, are placed in Shangri-La rooms the way other hotels offer Gideon bibles.
Shangri-La has recently diversified, augmenting its luxury chain with Traders Hotels, aimed at the more budget-conscious business traveller. Kuok is said to have come up with the notion himself, drawing on the experience of his younger years when his travel expense accounts were tight. Traders hotels the first one opened in Singapore in 1995 have smaller rooms than the Shangri-Las, coffee lounges instead of gourmet restaurants, and minibars whose contents are replaced at supermarket prices. “It’s a solid concept for Asian business executives whose budgets tend to be more constrained,” says James Peterson, an investment analyst at Crédit Lyonnais Securities (Asia).
Kuok’s hotel business has grown so rapidly that even his pockets have proved insufficiently deep. To help raise funds, Kuok created a public company called Shangri-La Asia, which owns 23 of the 33 existing Shangri-La hotels. Kuok and his family kept majority control, listing the company on the Hong Kong Stock Exchange in 1993. It was so well favoured that it achieved the remarkable feat of joining the Hang Seng index in less than two years.
But in May and June 1995 Kuok forced Shangri-La Asia to spend $540 million in shares acquiring hotels owned by his privately held group in Fiji, Indonesia and the Philippines. Minority shareholders in Shangri-La Asia complained that the company had paid too much, and grumbled about the dilution of their holdings and earnings per share. The market reflected their dissatisfaction: Shangri-La Asia ended up 1995 underperforming the Hang Seng index by 28%.
Benefiting public and private
In June 1996 Kuok pushed Shangri-La Asia into another major acquisition 13 hotel projects in China held privately by his group. Although this time the transaction, worth $320 million, was partly paid for in cash, minority shareholders again objected to the price and voiced fears of dilution. Shangri-La Asia share prices dropped by 5% and stuck there for a few weeks before bouncing back.
All this has led investment analysts in Hong Kong to take an ambivalent view of Shangri-La Asia. In the long term, they are confident that Kuok is pursuing a strategy that will eventually yield excellent returns from aggressive expansion in China and the region. But in the short run many believe Shangri-La Asia shares are overpriced and are advising clients that greater returns could be achieved elsewhere. “Kuok has vision he sees Shangri-La becoming the biggest hotel chain by far in Asia,” says ING Baring’s Dalziell. “But between this vision and what he is giving shareholders, something has gone amiss. And shareholders are reacting. He is perceived not to treat minority shareholders very well. He is perceived to favour his privately held companies over his public companies.”
The growth of the Shangri-La chain has shed a good deal of light on the relationship between Kuok’s private and public companies. Through guanxi his network of political and business contacts Kuok has used his private companies to buy choice real estate at favourable prices throughout Asia. His private development companies (mainly the Kerry Group, until his decision last year to list it in Hong Kong) assume the initial financial risks for new projects and carry out their development. As these assets prove themselves, they are sold to Shangri-La Asia or some other publicly listed entity in which Kuok holds majority control. The money extracted from these public companies is then funnelled back into the private companies, enabling them to embark on further expansion.
Rationalizing the unwieldy
The problem is that Kuok has to be taken at his word that these manoeuvres will in the long term bring benefits to shareholders. “There are plenty of cynics who believe that any entrepreneur in this part of the world only takes a company public after its profitability has peaked,” says a Hong Kong investment analyst, who views Kuok as the exception. “Part of the reason he is taking more and more of his projects public is that he is trying to rationalize the structure of his private companies, because their size is so unwieldy.”
Unwieldy is an understatement. In an analysis of the private holdings of Robert Kuok and his family published in 1986, the Far Eastern Economic Review counted about 250 companies controlled by Kuok, his relatives, trusts and impenetrable shelf companies in jurisdictions throughout Asia as well as in far-flung locations such as Liberia, Panama and Vanuatu.
If anything, 10 years on the group has become even more complicated, because its holdings have grown so much larger. Rationalizing the structure of something even as relatively straightforward as the hotel business isn’t easy. Among Kuok’s publicly listed hotel companies are the Hong Kong-based Shangri-La Asia, plus entities based in Malaysia, Singapore and Thailand. Then there is the privately held Shangri-La Hotels and Resorts, which manages operations for all Shangri-La hotels. “It would be logical for Shangri-La Asia to develop into the holding company for all the Kuok hotel operations,” wrote Alexandra Mackesy, an investment analyst at SBC Warburg in Hong Kong, in a 1996 financial report. “Such a reorganization would help to clear up the market confusion about group structure, and should increase visibility. We believe, therefore, that such a restructuring, if handled sensitively, should be viewed positively by the market.”
But that is easier said than done. There are legal limits to foreign shareholdings in Shangri-La entities in Singapore, Malaysia and Thailand so it would be technically difficult to meld them into Shangri-La Asia. And Shangri-La Hotels and Resorts has long-term management contracts with these other Shangri-Las that prevent it also becoming part of Shangri-La Asia. It seems as if Kuok’s penchant for secretive, complicated deal-making has come back to haunt him.
But Kuok’s age and the enormous financial demands of his sprawling empire make it imperative that he attempt to modernize its organization, rendering it more attractive to outside investors before he runs out of time. With that in mind, he took his Kerry Group public in 1996, listing it as Kerry Properties. In the past, Kerry was Kuok’s primary vehicle for developing hotels for the Shangri-La chain. It owns a vast property portfolio in Hong Kong and China that will no doubt be used to press ahead with commercial and residential buildings as well as infrastructure projects. “[Kerry’s] projects are currently targeted primarily at foreign investors,” stated the IPO prospectus, which was praised by investment analysts for a level of disclosure and attention to detail unusual by Hong Kong standards. Analysts are also pleased that the boards presiding over Kerry and Shangri-La Asia include not only business-savvy Kuok family members, such as his two oldest sons, Beau and Ean, and two nephews, but also experienced, independent-minded executives from various Asian and western countries.
Yet as he moves his companies increasingly into the public realm, Kuok is being faulted by analysts for his intensely private personal style. “What has been the greatest hindrance for the development of his public companies has been Robert Kuok’s far-too-low profile,” says a Hong Kong investment banker who promotes Kerry and Shangri-La Asia shares abroad. “Foreign institutional investors want to see and hear more of him. Whenever I go to the US, pension fund managers seem to have heard a lot more about [Hong Kong-based property magnate] Li Ka-shing. And he doesn’t have a fraction as much western-style management or transparency in his companies as Kuok has.” A report on Shangri-La Asia, published last year by SBC Warburg, asserted that the Kuok Group needs to develop an investor relations programme “if it is to join the ranks of the heavyweight ‘blue chips’, among international institutional investors”.
Adding to the empire
The restructuring of existing enterprises has not impeded new ones. Next year, his joint venture with Coca-Cola will have 10 factories operating in China, giving him a virtual distribution monopoly in the world’s most populous nation. In almost every major Chinese city, Kuok is using his Shangri-La hotels as hubs, surrounding them with residential and commercial buildings.
Mass media is another lucrative new frontier. All Kuok’s media investments are in existing, publicly listed companies, a departure from the usual Kuok strategy of privately held start-up ventures or shelf companies. In 1993 he bought a controlling share in the highly profitable Hong Kong daily the South China Morning Post and became the chairman of its board. “I think he was persuaded to do it by ‘friendly’ Chinese mainland officials,” says WI Carr’s Mulcahy, formerly the newspaper’s business editor. “They wanted the newspaper in safe hands as Hong Kong goes through this transition period. But Kuok would not have done it purely as a favour to the Chinese. It was a good investment opportunity.”
The Kuok Group has also purchased a 20% share of Television Broadcasts (TVB), which operates the most popular TV channels in Hong Kong and is the world’s largest producer of Chinese-language TV programmes. Kuok also bought an interest in TVE Holdings, a Hong Kong company whose activities include film, music, magazines and books.
Both TVB and TVE were controlled by Sir Run Run Shaw, the renowned director and producer of Chinese action films, who soon found himself in a corporate struggle with Kuok, once a good friend. In 1996 Kuok launched the first really hostile takeover in Asia involving Chinese business groups, and succeeded in wresting control of TVE from the 92-year-old Shaw.
Hong Kong gossip has it that Sir Run Run fell foul of Kuok because he dismissed Kuok family members from the management of TVB. This may have been a factor but cold business calculations were probably the main reason. “Sir Run Run insisted on keeping a firm hand over management of TVB and TVE, but he has gotten crustier and more conservative, and is unwilling to move these companies into new ventures,” says an investment analyst who has kept close track of the Shaw-Kuok conflict. “Kuok, meanwhile, sees all sorts of opportunities unfolding for the media business in Asia.”
For starters, there is the rapid growth of Chinese music TV channels in China and throughout Asia. TVE’s huge music library could spawn and feed a profitable new cable company. TVE also owns several very successful publications, including a a teenage magazine with great potential on the mainland, and a car magazine whose circulation in Hong Kong is exceeded only by Reader’s Digest.
The timetable for his media projects implies that Kuok intends to lead an active life for some years to come. But work isn’t his only consideration. Besides his three adult children he has three much younger children by his second wife Pauline, a former stewardess from Penang 30 years his junior whom he wed after his first wife died. But for Kuok even recreation is slotted into a busy schedule. Informed by his physician that he should walk three miles a day to keep fit, Kuok has taken to wearing a Japanese electronic device that lets him know when he has paced the equivalent distance at work and at home.
Kuok’s older sons, Beau and Ian, who have become increasingly involved in their father’s major ventures, confirm that their father is something of a workaholic. They have been known to joke with friends that his notion of retirement is to spend half his day at the office and the other half keeping an eye on them. That may be wishful thinking Kuok himself says he still shows up at his headquarters every morning and stays there until nightfall.
“Sometimes, I nearly doze off at my desk,” he said in his TV interview, “and I have to wake myself up because I’ve got to phone my managers maybe one in Kuala Lumpur, one in Jakarta, one in Beijing, one in Shanghai. They just can’t be put off to another day.”
