Hong Kong's new giants

Chapter 655 [Battle of Xiangjiang Telecom 1]

London, Great East Telegraph Office Headquarters.

Dadong Telegraph is a multinational company with more than 4 employees and operations in more than 70 countries and regions around the world. It holds 54% of Hong Kong Telecom's stock.

Hong Kong Telecom is one of the most important companies under Dadong. Its business includes fixed telephone network and mobile telephone, international telephone, satellite communication, Internet access service and complete telecommunications system.

Judging from the financial statements, Hong Kong Telecom’s market capitalization is around HK$2000 billion, and its earnings are quite stable and healthy (annual profit of just over HK$100 billion). The net assets per share are HK$3.18 (approximately 100 billion shares). The earnings per share have remained constant over the past few years. Around HK$1.

The share price of Hong Kong Telecom has hovered around HK$20 for a long time, that is to say, its price-to-earnings ratio (the so-called price-earnings ratio is the ratio of stock price to annual profit) has been around 20 times for a long time (Hong Kong Telecom shares are more than 20 Hong Kong dollars, and the profit per share is about 1 Hong Kong dollar).

Yuan Tianfan and Liang Botao, the old partners, once again worked together to take charge of the New Era Group's acquisition of Hong Kong Telecom.

The two came to the headquarters of the Dadong Telegraph Bureau. This was their third visit.

For the first time, the board of directors of the Dadong Telegraph Bureau felt very sudden, and was not prepared to sell Hong Kong Telecom, so no results were established;
The second time, the board of directors of the Dadong Telegraph Bureau has been loosened, and the two sides have tentative contacts, but there is no substantive negotiation result;

This is already the third time they have met. Before the two left, the boss told them that if this time, the Dadong Telegraph Bureau still has no obvious willingness to sell, it will temporarily cancel the acquisition plan until the Dadong Telegraph Bureau changes the board of directors. After that, continue to contact.

Therefore, after the two came to the meeting room of the Dadong Telegraph Bureau, they carefully observed the situation.

Yuri, the chairman of the board of directors of the Dadong Telegraph Bureau, brought several directors with him this time, and immediately made the two of them look at each other, knowing that the Dadong Telegraph Bureau might be preparing to sell Hong Kong Telecom.

Of course, this is a huge acquisition, and there are many waves in the middle, and the two dare not take it lightly.

At the beginning of the meeting, Yuri pretended to hesitate and said: "Hong Kong Telecom is an important asset of the Dadong Telegraph Bureau. We have made great efforts to develop Hong Kong Telecom over the years."

Yuan Tianfan and Liang Botao immediately scolded in their hearts. They have made a shitty effort to develop. The reason why Hongkong Telecom is today is because it has the franchise rights of "local calls" and "international calls" in Hong Kong, especially the franchise rights of "international calls". , is the most profitable business.

To be honest, if the franchise of 'international calls' is not about to expire ten years later, Dadong Telegraph and Cable may not choose to sell; because they know that, just like 'local calls' expired in 1995, The Hong Kong government immediately attracted several telecommunications companies to compete, so Hong Kong Telecom will also usher in greater competition in the future.

Yuan Tianfan said seriously: "After all, Hong Kong is just a small place with millions of people, and the development potential of the telecommunications market is very limited. And Hong Kong Telecom's business development in the Mainland has failed, and it has already lacked the 'imagination' of the capital world. Companies without 'imagination' don't have much prospects. In addition, the patent period is approaching, and it is more in their own interest for Dadong Telegraph to cash out, and maybe invest in a more imaginative Internet, and they will earn more!"

There is no way, I have to do ideological work first if I take the initiative to come to the door to buy.

As soon as Yuan Tianfan's words fell, the directors of Dadong Telegraph Bureau all showed expressions of approval.

In the capital market, "imagination" seems to be more important than actual profit. HKT's actual profitability is not bad, but the "imagination" it provides to the capital market is already very limited.In fact, the stock price of Hong Kong Telecom hovering around HK$20 for a long time is the best proof.

In the past, Hong Kong Telecom's status in Hong Kong was equivalent to that of Huaxia Telecom in China, enjoying the exclusive right to operate.This is something that can provide "imagination" for the capital market. Today, this right has been deprived by the Hong Kong government by means of redemption.At present, there are as many as nine companies in Hong Kong with telecom operating licenses. Although Hong Kong Telecom is still the unshakable leader, it will inevitably be under the pressure of competition. In this way, its charm in the capital market will be greatly reduced.

The development potential of the Heung Kong Telecom market is very limited, and the development of mainland telecom business is a visible growth point.In this regard, Hong Kong Telecom has also made a lot of efforts: it successively gave up shares to Zhongtai and Huaxia Telecom, which are listed in Hong Kong. Huaxia Telecom holds about 10% of Hong Kong Telecom’s shares and is its second largest shareholder. Come to their help to open the door to China's telecom market.

However, the tough attitude of Huaxia Telecom's management department did not give Hong Kong Telecom a good result. Without the exclusive franchise and no room for further development, Hong Kong Telecom lost its attractiveness in the capital market.In addition, Dadong is a British company after all. After 1997, there are not many reasons to continue to stay in Hong Kong.

These reasons, in fact, have already begun to think about these reasons in the two previous talks, the board of directors of the Great East Telegraph Bureau.

After thinking for a while, Yuri said, "I can persuade the board of directors to agree to the sale, but what conditions can you give?"

Yes, the first step was successful, Yuan Tianfan and Liang Botao said in their hearts at the same time.

Yuan Tianfan said: "We can purchase the Hong Kong Telecom shares in your hands according to the market value, that is, 22 Hong Kong dollars per share for acquisition, and the payment method is half cash and half stock."

In fact, this is also the result of Lin Zuhui's calculations.Because he guessed that the Hong Kong Hang Seng Index will still increase by at least 26.5% to 2650% this year. Even if Hongkong Telecom stagnates, it will not be a problem to increase by [-]%. That is, the stock price is [-] yuan per share and the market value is more than [-] billion.

As for the stock issue, New Times Group is now three times the market value of Hong Kong Telecom. Even if he pays a part of the stock, his shareholding will not be diluted much.What's more, there are plenty of opportunities to increase holdings.

Yuri said decisively: "We will not accept stocks, and we are also very dissatisfied with your offer!"

Yuan Tianfan said: "It is impossible not to pay for such a large acquisition, so we have to pay half of the stock! As for the price, Hong Kong Telecom's stock price has been like this for a long time, which shows that it has no future in our hands. So our offer is reasonable."

After a short confrontation between the two sides, neither of them was willing to give in.

Yuri said with a smile: "In this case, please ask your boss for instructions, and then talk to us!"

The implication is that today is over!

In fact, Yuri has already thought of a way, which is to introduce new competitors to increase the purchase price and cash payment ratio.

Of course, Yuri took it for granted. Lin Zuhui thought about it beforehand. There are almost no competitors who can compete with New Era Group.

Singtel?
With a market value of only 2000 billion Hong Kong dollars, how much cash can it produce?
The New Era Group is directly half cash and half stock, and this payment ratio is quite high.

Li Zekai's movement?

Don't be kidding, Yingdong is still a child, and it hasn't even been listed.

Even if this acquisition is delayed until the second half of the year, how can the market value be increased to 600 billion without the profit of "Cyberport"?
Hutchison Whampoa?

No way, British Telecom has not been sold yet, and Hutchison Whampoa is equally unsatisfactory; unless Li Chaoren shows his determination to change his previous "focus on cash flow and debt" and go crazy, it will be possible.

Therefore, at this time, there is really no competition.

The most difficult part, on the contrary, was persuading Dadong Telegraph to sell Hong Kong Telecom.

Yuan Tianfan said: "Okay then, let's take our leave first!"

The two also knew that the Dadong Telegraph Bureau would not easily hand over the chips in their hands, and the New Era Group's cards were not played, so there is no need to worry.

Monday, May 1.

On the first working day after New Year's Day, Lin Zuhui came to the headquarters of New Era Group in a good mood.Although I was in a good mood, my body seemed to be a little 'weak'. For three consecutive days, I 'beat 9 times', and my hard-boiled body couldn't take it anymore.

Of course, his 'virtual' is not real, it can only be said that he is 'not at his peak'.

When he came to the office, Lin Zuhui leisurely read newspapers and computers.

In fact, Lin Zuhui doesn't have too many jobs now, even if he just sits in the office and drinks tea every day, the company can develop stably.Although he doesn't have a son who can share the burden for him, the company he owns has long been a "professional manager" system, and he is more of a "spiritual symbol". If you give some instructions appropriately, you can sit back and relax.

When his employees reached more than 20 (all companies under his umbrella), he had no way to personally manage the company's specific affairs, otherwise he would have to be busy.

In the morning, Liang Zhenxun came to Lin Zuhui's office.

"Boss, all European and American bank stocks have been emptied, and the total return of funds is 458 billion Hong Kong dollars, and the total return rate is about 430%."

Lin Zuhui said with satisfaction: "Very good rate of return! The highest rate should be Citibank, right?"

Liang Zhenxun nodded and said: "Well, we spent 2 million US dollars back then, and this time we returned 30.2 billion US dollars, almost 15 times."

Over the years, Citibank has paid a lot of dividends and has also been bought into Citibank shares. Therefore, after the merger of Citigroup and Traveler, New Era Group still owns 1.52% of the shares.And this year, Citibank's market value is around 2000 billion U.S. dollars, and it is only natural that it has made so much profit.

Citibank's stock may continue to rise, but it is inevitable to cash out in advance, after all, New Times Group needs to spend money.

Including the shares of Microsoft (1.5%) held by New Times Group, it will also be cashed out in July this year. If the cash out is completed by the end of the year, it is expected to be worth 70 billion US dollars (550 billion Hong Kong dollars); Vodafone’s shares can also be cashed out tens of billions of Hong Kong dollars. above.

As for Sony's stock, you can choose to cash out more than 300 billion Hong Kong dollars after the millennium.

The stock alone, together with the cash out this time, is 1500 billion in scale.

If the sale of the British telecommunications industry is counted, I am afraid that an additional 800 billion will have to be added.

The "extra" cash flow of 2300 billion can be regarded as the cash flow of the world's top group, so it is not an exaggeration at all to have a market value of more than 6000 billion. It can be said that the assets of New Era Group are already very underestimated.

10000 trillion by the end of the year is definitely no problem. Originally, the Hang Seng Index is expected to increase by about 5% this year!
"How much cash is in the company's books?"

"More than 650 billion!"

"Well, we will continue to vigorously develop shipping, hotels, and shopping centers this year. The acquisition of Hong Kong Telecom also requires cash flow."

"Okay, I'll make the financial arrangements."

Hearing this, Liang Zhenxun actually wanted to ask a question: "As a major shareholder, don't you want to pay dividends?"

After all, companies like Henderson and Sun Hung Kai allocate a large proportion of funds for dividends every year, and their bosses are not very active in dividends.

1997年盈利700多亿（出售物业和黄金期货就占400多亿），而1998年初的新时代集团分红也才80亿不到。

It seems that Xiangjiang is the company that pays the most dividends, but in fact it is equivalent to only paying out 10% of its annual profit dividends.

And last year (1998) the profit was estimated to be about 750 billion, and this year's dividend seems to be less than 100 billion.

Thinking of this, Liang Zhenxun actually understood a little bit, the boss is really not short of money.If you can earn so much financially for the company, then you must also earn a lot of money personally.

Two days later, Yuan Tianfan and Liang Botao returned to Hong Kong to report the situation to Lin Zuhui.

After listening to the attitude of the Dadong Telegraph Bureau, Lin Zuhui was obviously thinking.

Hong Kong Telecom is a rich asset. Although the market value of Yingke plummeted from 5000 billion to more than 200 billion after the acquisition by Li Zekai in the previous life; but in fact, after the merger of Hong Kong Telecom and Yingke, it was spun off after 2010, and the market value has remained constant. It fluctuates around 1000 billion.

On the whole, this deal was screwed up by Li Zekai. If it wasn't for his father, the merged PCCW would have been dragged down with only hundreds of billions in debt. After all, the annual interest is tens of billions, so PCCW Except for Hong Kong Telecom's profit, other businesses have no profit at all.

So if it is New Era Group, how can it profit from this transaction?
Soon, Lin Zuhui had a "capital market" plan in his mind, but he didn't say it immediately.

"Well, since Dadong Telegraph has already been moved, then they must want to introduce competitors next, so let's wait and see what happens! Of course, Hongkong Telecom has a premium of 10%~20%, and we can also make a move; Also, more cash flow is not out of consideration, after all, we can borrow a lot.”

Yuan Tianfan and Liang Botao looked at each other, and then Yuan Tianfan said: "Acquisition of an asset with a huge market value like Hong Kong Telecom, a premium of less than 10% is also feasible."

He knows that the boss will make money, but he is also the one who spends money, so remind him.

Lin Zuhui said with a smile: "Although that is the case! But Dadong Telegraph may drag on, after all, the seller is now taking the initiative. This year is the year of the Internet explosion, and the telecommunications industry is also rising, so I think Heung Kong Telecom has risen to more than 2600 billion It is also entirely possible. Think about it, should we take the initiative to raise the price, or wait until later and be more passive?"

This is the benefit of knowing the general trend!

Assuming that the market value of Hong Kong Telecom exceeds 2600 billion in the second half of the year, the purchase price of each consortium will not be at a premium.

But if the New Times Group is willing to offer the price for the second half of the year, then other consortiums may not follow suit, and Dadong Telegraph is more willing to accept a premium.

In fact, the Dadong Telegraph and Telegraph Bureau will not be in a hurry to sell at a low price. They will soon make news and introduce new competitors.Even so, they still have the initiative and can wait for the price to sell, and they are not in a hurry to make a deal unless the price is very satisfactory.

When Yuan Tianfan and Liang Botao heard about this year's financial situation, there was no doubt that if the boss said that this year's market is going to be this year, then he must be right.After all, this is a fact that many people will recognize.

"Okay, we got it!"

Lin Zuhui added: "If the acquisition can be completed within a month or two, New Times Group can reduce the acquisition cost in the capital market, so please pay attention to my opinion."

Although the two wanted to know what to do, after all, the first step of the acquisition had not been completed, so it was naturally not good to ask now.

Liang Botao said at this time: "Boss, if the cash ratio is to be increased, it is very important to obtain official support from the mainland. First, Huaxia Telecom holds 10% of Hong Kong Telecom's shares; second, Bank of China can provide loans."

Lin Zuhui said confidently: "They have no reason not to support it! Of course, it will depend on the situation later!"

"Ok!"

In fact, Lin Zuhui also intends to use loans as the main source of funds for this acquisition, so various banks will be able to provide loans at that time.He is prepared to loan 100 billion US dollars for this acquisition.

The group debt of the entire New Times Group is only 200 billion Hong Kong dollars, which is indeed a very low debt for a group with an asset value of nearly one trillion yuan.

No way, I have cashed out a lot in the past few years, so that the cash flow is very sufficient.

If it weren't for such a large acquisition, there would really be no chance to increase debt!

(End of this chapter)