Rebirth in Hong Kong: From Dessert Shop to Industrial Empire

Chapter 163 Arrival (Seeking monthly votes, recommendations, and subscriptions!)
"Mr. Chen, Hutchison Whampoa agreed so quickly, it's a bit unexpected!" Fang Wenshan reported to Chen Bingwen with delight.

Chen Bingwen didn't show much surprise upon hearing this; instead, he seemed thoughtful.

There must be a demon in the abnormal situation!
Hutchison Whampoa is a long-established British trading company, and W.R. Smith is known for his shrewdness and toughness.

There must be a reason why they agreed so readily.

While the HSBC brand name of Wharf Holdings certainly served as a stepping stone and a lubricant, reducing the other party's resistance, this may only be one of the reasons.

A more likely scenario is, as Xu Shiwen stated, that Hutchison Whampoa itself intended to divest non-core retail businesses like Watsons in order to concentrate resources on developing core businesses such as real estate and ports.

The emergence of Chen Ji perfectly aligned with their strategic adjustment plan.

Or perhaps Xu Shiwen said something at the Hutchison Whampoa board meeting, after all, Xu Shiwen holds 18% of Watsons' shares and is also a director of Hutchison Whampoa.

His words may be seriously considered by Wyman Wong and the Hutchison Whampoa board.

However, it's best to confirm this last point by simply calling Xu Shiwen!

Thinking of this, Chen Bingwen raised his index finger to his lips to signal Fang Wenshan, and then dialed the phone number in Xu Shiwen's office.

After the call connected, Chen Bingwen pressed the speakerphone button so that Fang Wenshan could also hear it.

"Manager Xu, I am Chen Bingwen. I apologize for bothering you."

"Mr. Chen, hello!"

Xu Shiwen's enthusiastic voice came from the other end of the phone. Before Chen Bingwen could ask any questions, he said with a smile, "I guess you're calling about the board meeting results? It's convenient for me to talk here, please go ahead."

Chen Bingwen and Fang Wenshan exchanged a glance upon hearing this.

Sure enough, those who can sit in the positions of Watson's manager and Director Huang are all shrewd people!

“Manager Xu is a straightforward person, so I won’t beat around the bush either,” Chen Bingwen said with a smile. “Hutchison Whampoa’s swift agreement to the sale in principle has indeed taken me somewhat by surprise.”

I imagine Manager Xu must have played a crucial role in this, through his strong support and maneuvering at the board meeting.

Xu Shiwen chuckled on the other end of the phone, a hint of smugness in his voice: "Mr. Chen, you flatter me."

I was merely presenting the pros and cons objectively to Mr. Wei Li and the board of directors, based on considerations for the future development of Watsons.

He paused, then lowered his voice: "Although Wei Li is assertive, he is an extremely pragmatic person."

In the current economic climate, selling Hutchison Whampoa's stake in Watsons will help recoup funds and allow the group to focus on its core businesses, such as real estate and ports, which aligns with the group's overall strategy.

Moreover, it is not easy to find a buyer like Chen Ji who is powerful, sincere, and has few obstacles to the transaction.

Of course, the endorsement from HSBC on behalf of HOTO also played a crucial role, convincing the board of directors of Chen Kee's financial strength and the reliability of the transaction.

Chen Bingwen and Fang Wenshan exchanged a knowing glance.

Xu Shiwen's words were a clever way of showing off his achievements, implying his key role in pushing things through the board meeting, highlighting the underlying business logic behind Hutchison Whampoa's quick agreement, and also giving HSBC face. He was a master of diplomacy and left no room for error.

"I see. Manager Xu's words were truly insightful and hit the nail on the head!"

Chen Bingwen sincerely said, "I will remember this kindness."

We hope Manager Xu will continue to provide support for the ongoing background investigation.

"Mr. Chen, you're too kind. It's my duty," Xu Shiwen replied very politely. "I will do my best to ensure everything goes smoothly within my responsibilities."

"Thank you, Manager Xu! Let's keep in touch."

After hanging up the phone, there was a brief silence in the office.

Fang Wenshan still had a look of disbelief on his face as he was processing the information revealed in Xu Shiwen's words.

After a while, he looked at Chen Bingwen and exclaimed, "Mr. Chen, this is truly unexpected."

Hutchison Whampoa's willingness to agree so readily suggests they're determined to bet on real estate, even willing to relinquish a century-old brand like Watsons.

Chen Bingwen smiled and said, "Regardless of what they think, at least the current result is good."

Fang Wenshan nodded in deep agreement, "Then shall we proceed with the background check on Watsons as normal?"

"Proceed according to plan, but we need to speed it up even more!" Chen Bingwen said. "The more Wei Li wants to get rid of the deal quickly, the less we can relax our due diligence. We must uncover every potential risk. At the same time, we need to speed up the negotiation and closing process as much as possible!"
We must secure Watsons on the most favorable terms before they regret their decision!

Chen Bingwen didn't want to wait until the second half of the year for Watsons to be acquired by Li Jiacheng and become a money-making tool in his hands.

"Understood! I'll make the arrangements immediately and urge the Huoduoli team to speed up the process."

April 12, 4 PM, conference room on the top floor of Weiye Building.

Chen Bingwen sat calmly in the main seat.

Fang Wenshan sat to his left, with a thick financial model and contingency plan spread out in front of him.

Gu Yongxian sat to his right, idly scribbling on a notebook with a pen.

They are waiting for senior representatives from Citibank, Morgan Stanley, and Goldman Sachs for the Asia-Pacific region.

This was the first formal meeting after Chenji Foods issued a syndicated loan offer.

There was a soft knock on the conference room door, and Secretary Ali led in three distinguished bank representatives.

"Welcome, everyone. Thank you for coming. I am Chen Bingwen from Chen Ji Foods, this is Fang Wenshan, the financial director, and this is Gu Yongxian, the legal counsel."

Chen Bingwen stood up, shook hands with each of the three representatives, and briefly introduced his team to them.

The three bank representatives smiled, handed over their business cards, and introduced themselves.

"Li De, Managing Director of Corporate Banking, Asia Pacific, Citibank."

"Zhou Weiwei, Executive Director of Morgan Stanley Asia Finance Department."

“Mark, co-head of Asia financing at Goldman Sachs.”

After a brief exchange of pleasantries and business cards, everyone took their seats.

After serving tea to everyone, Secretary Ali quietly left the meeting room.

Li De, the most senior member of the delegation from Citibank, got straight to the point: "We have studied the data you provided in detail. The growth rate and profitability are indeed impressive, especially the breakthrough in the Japanese market."

The 300 million yuan funding you requested is intended for strategic acquisitions and operating capital.

We would like to understand the more specific plans, and how Chan Kee will assess and address the current macroeconomic environment, especially the dual risks brought about by rising interest rates and Hong Kong dollar exchange rate volatility.

As expected of someone in finance, the first question went straight to the heart of the matter. The pressure instantly fell on Chen Bingwen.

Chen Bingwen glanced at the three bank representatives and, seeing that they were all looking at him, calmly said, "Mr. Li De's question is very crucial."

He paused briefly to organize his thoughts, "More than 70% of this loan will be used to complete the controlling acquisition of Watsons and its subsequent channel integration."

The remaining funds will be used to accelerate expansion into the North American and European markets, as well as for new product development.

At this point, he gestured for Vincent Fang to show financial charts, saying, "Our products are everyday consumer goods that are affordable."

It is not the first expenditure to be cut when the economy is under pressure.

This is a stress test based on historical data. Even in a scenario of rising interest rates and slowing economic growth, our core business cash flow has maintained strong positive growth, fully covering increased interest expenses.

Morgan Stanley's Zhou Weiwei pressed further, "But acquisitions inherently carry integration risks. How do you ensure success?"

Chen Bingwen nodded and replied, "We did not make the acquisitions blindly."

First, we retained the original management team with its core members;
Secondly, Watsons' distribution channels can immediately boost our sales, and our popular products can bring new customers and higher profits to Watsons stores.

Goldman Sachs' Mark then asked, "How can you ensure future growth and continued internationalization?"

Chen Bingwen smiled and confidently replied, "Mr. Mark, internationalization is our fundamental strategy. The success of the Japanese model has validated our approach of mitigating risk through cooperation with local giants."

Next, in expanding into the North American and European markets, we will initially adopt authorized partnerships or seek out strong local distributors to test the market with minimal capital investment.

The focus of this loan is to solidify our absolute leading position in Asia and build a solid base for profits and cash flow.

Finally, he said sincerely, "Gentlemen, we are not seeking a simple bridging loan."

We seek to establish long-term partnerships with strategic financial partners who value long-term worth.

Looking ahead, we will have even greater business and funding needs, which we will share with our strategic financial partners!

The three bank representatives exchanged glances.

Li De said with a smile, "Mr. Chen, thank you for sharing. Your vision and Chenji's solid performance have left a deep impression on us."

We believe that Chenji Foods fully meets the criteria for a high-quality borrower.

Citibank is very interested in leading this syndicated loan.

“Morgan Stanley shares this view,” Zhou Weiwei added.

“Goldman Sachs is looking forward to getting involved,” Mark nodded in confirmation.

All three banks agreed to the loan, and the next round of talks shifted the focus to specific terms.

Vincent Fang said, "Regarding the loan currency, we requested that Hong Kong dollars be used, not US dollars."

This completely avoids the risk of exchange rate fluctuations, matches our income with the currency of our debt, and makes our cash flow more controllable.

Li De frowned slightly: "Mr. Chen, Director Fang, the current international syndicated loan market is mainly based on US dollars."

Hong Kong dollar financing costs may be slightly higher, and the availability of funds is less flexible than that of US dollars.

Would you like to reconsider?

Chen Bingwen shook his head without hesitation: "Mr. Li De, thank you for your suggestion."

However, after careful consideration, we have determined that exchange rate risk is something we cannot predict and are unwilling to bear.

The vast majority of Chan Kee's revenue and assets are denominated in Hong Kong dollars, making Hong Kong dollar loans a natural hedging measure.

I believe that for partners seeking long-term, stable returns, a borrower with a clearer and more controllable risk structure is more attractive.

Three years later, not only will the loan interest rate rise to 20%, but the Hong Kong dollar will also depreciate by nearly 20% against the US dollar.

If you borrow US dollars, convert them to Hong Kong dollars for use, and then convert them back to US dollars to repay the loan, Chen's will lose a fortune!

Between two evils, Chen Bingwen had no choice but to firmly select the Hong Kong dollar.

Zhou Weiwei pondered for a moment and then asked, "Then what about the interest rate?"

The market currently anticipates interest rates to rise. Does your company prefer floating or fixed interest rates?

This time, Chen Bingwen answered more decisively: "Fixed interest rate."

We hope to completely lock in funding costs within the next three years.

Even if this requires paying a premium slightly higher than the current floating rate, we believe it is well worth it.

Clear financial planning is crucial for executing our long-term strategy; we cannot expose the financial costs of our core strategy to the risk of interest rate fluctuations.

"Three-year term?"

Goldman Sachs' Mark confirmed, "Acquiring and integrating a company like Watsons can be a very long process."

Three years from now, if the market environment is unfavorable, refinancing may face challenges.

“Three years is enough,” Chen Bingwen affirmed. “Three years is enough time for us to complete the deep integration of Watsons, unleash synergies, and take the company’s overall cash flow and profitability to the next level.”

At that time, we will have ample refinancing capabilities, or we can repay the debt using our own cash flow.

If Chen Bingwen couldn't even earn 300 million in loans and corresponding interest in three years, he would be embarrassed to call himself a reborn person.

The meeting lasted for nearly two hours.

Chen Ji's profitability, channel integration capabilities, and risk resistance gave the three bank representatives full confidence in Chen Ji's repayment ability.

Finally, Li De, representing the three, stated: "Very good, Mr. Chen."

HK$300 million, three-year term, fixed-rate loan of 10%.

While this differs from market practice, Citi understands and respects your company's prudent financial decisions based on the characteristics of your business.

We will issue a preliminary terms list as soon as possible based on this framework.

“Morgan Stanley agrees to this framework.” Zhou Weiwei smiled and nodded.

“Goldman Sachs also had no objection,” Mark added.

After seeing off the three bank representatives, Fang Wenshan couldn't hide his excitement: "Mr. Chen, it's a success! They have fully accepted our proposal!"

(End of this chapter)