Rebirth in Hong Kong: From Dessert Shop to Industrial Empire

Chapter 168 Loan (Seeking monthly votes, recommendations, and subscriptions!)
By this time, Brigitte Lin had already become a sensation in Hong Kong, Taiwan, and Southeast Asia with her numerous romantic dramas by Chiung Yao and commercial blockbusters such as "On the Water's Edge," making her the dream girl and fashion icon for countless people.

Moreover, she has a beautiful appearance and a temperament that can be both gentle and strong.

It attracts male audiences and serves as a trendsetter for women's fashion, with influence spanning film fashion and popular culture, reaching a very wide audience.

Having Brigitte Lin as the spokesperson would perfectly fill the market gap that exists if Jackie Chan were the sole spokesperson.

Moreover, she and Jackie Chan can perfectly complement each other's images, jointly covering a wider range of consumers and scenarios.

In this way, Chenji's global brand endorsement strategy began to take shape.

The European and American markets were ignited by the future superstar Michael Jackson, setting the tone for international high-end trends.

In the Asian market, a multi-endorsement matrix was formed, consisting of Jackie Chan, Momoe Yamaguchi, and Brigitte Lin, to achieve deep penetration and three-dimensional image shaping of the brand in different regions and among different groups of people.

Chen Bingwen originally planned to have his secretary, Ali, contact Brigitte Lin's agent to inquire about prices and discuss endorsement matters.

But the moment he picked up the phone, a thought flashed through his mind, and he remembered some reports he had read in his previous life: Jackie Chan and Brigitte Lin had a very close personal relationship and were very good friends.

Instead of going through cold, hard business processes, leveraging this existing personal relationship might be more efficient.

With that thought in mind, Chen Bingwen changed his mind and dialed Cheng Long's number directly.

On the other end of the phone, when Cheng Long heard that Chen Bingwen wanted to invite Brigitte Lin to be the spokesperson for "Pulse", he was overjoyed: "Brother Wen! Leave this to me!"

I'll talk to Xia! It's a rare opportunity to work with Xia, she'll definitely be interested!
I believe she won't refuse!

"Okay, then thank you for your hard work, Ah Long."

Please handle this matter first and express our sincerity. Specific business terms can be discussed between her agent and our business department later.

Chen Bingwen responded with a smile.

The attentiveness that Cheng Long exuded over the phone reminded Chen Bingwen of the rumors circulating in Hong Kong's entertainment industry at the time, about Cheng Long's excessive flattery of Brigitte Lin, which had even displeased Lin's boyfriend, Chin Han.

"This Ah Long, as soon as he heard it was a collaboration with Ah Xia, he was even more enthusiastic than when he signed himself as the spokesperson." Chen Bingwen put down the phone and shook his head helplessly.

As expected, Cheng Long was extremely efficient.

Two days later, he called back excitedly: "Brother Wen! It's all done!"
I told Xia about it, and she was very interested, especially after I told her about your future plans, Wen Ge. She thought they were very promising!

She agreed to let her agent contact your business department first, and you can discuss the specific details later!

Chen Bingwen said gratefully, "Thank you, Ah Long! I'll treat you to dinner once the contract is signed!"

While Chen Bingwen finalized the global brand ambassador strategy, another crucial aspect of Chenji's future development also made groundbreaking progress.

The syndicated loan agreement between Chan Kee and Citibank, Morgan Stanley, and Goldman Sachs was officially signed, and a huge sum of HK$300 million was injected into Chan Kee Foods' account in one go.

The arrival of HK$300 million greatly boosted Chen Bingwen's confidence.

With this funding, he can complete the acquisition and integration of Watsons, combining its century-old brand reputation, mature retail network and supply chain system with Chen Kee's own strong product strength and brand marketing capabilities to form a powerful synergy.

This will lay a solid foundation for Chenji's future accelerated expansion in terms of channels and operations.

And the ultimate goal of all this is that vast market in the north.

He knew that with the reform and opening up of the mainland, it wouldn't be long before Coca-Cola and Pepsi would compete for a huge share of the mainland beverage market.

They adopted a savior-like stance, ostensibly to help the development of domestic beverage brands.

Leveraging its strong capital and brand advantages, it staged a business battle later known as "the two Coca-Cola companies flooding the seven armies".

Many domestic beverage brands, such as Tianfu Cola, Laoshan Cola, and Beibingyang, have withered away under the crushing pressure from Coca-Cola and Pepsi.

Chen Bingwen knew that to prevent this tragedy from repeating itself, he had to make arrangements in advance and seize the initiative before the two companies fully exerted their efforts.

However, having money alone is not enough to get those mainland "seven armies" to cooperate with him, a Hong Kong businessman, in the future.

He must establish a strong, high-end, and international brand awareness of "Chen Ji" in the minds of mainland consumers in advance.

Only when his brand has enough appeal will local manufacturers feel that cooperating with him is valuable and helpful to them.

The acquisition of Watsons, leveraging its century-old brand reputation and the high-end image created globally by its soon-to-be-established matrix of celebrity endorsements, is precisely aimed at increasing Chen Kee's leverage and attractiveness in mainland China at that crucial historical juncture in the future.

However, just as the plan to acquire Watsons was progressing rapidly, Vincent Fang, who had been accompanying the Wharf Holdings team in conducting due diligence, brought unexpected news.

"Mr. Chen, when the company was conducting due diligence on Watsons, they discovered a problem."

Fang Wenshan held a document in his hand and reported to Chen Bingwen in a very serious manner.

"Tell me, what's the problem?"

Chen Bingwen remained expressionless and gestured for Fang Wenshan to continue.

It's normal to encounter some legacy issues when acquiring a company like Watsons, which has a history of over a century.

He had already prepared himself mentally.

"We discovered this while reviewing Watson's debts and assets."

At the end of last year, they borrowed HK$32 million from HSBC in the company's name.

Fang Wenshan reported.

"Thirty-two million? What's it for?" Chen Bingwen asked.

This number is by no means small at this point.

"The accounts show that the funds were used to purchase a piece of land." Fang Wenshan glanced at the documents in his hand and continued to explain, "The land is located in the Yuen Long Industrial Area in the New Territories, and it is quite large."

However, the problem is that, based on our initial understanding and assessment, the site is currently located in a relatively remote area with inadequate infrastructure, raising doubts about its short-term development value and monetization potential.

The repayment of principal and interest on this loan will put considerable pressure on Watsons' cash flow in the coming years.

After listening, Chen Bingwen fell into a brief moment of contemplation.

This was indeed an unexpected burden.

Acquiring Watsons means taking over both its assets and liabilities.

This huge land loan will undoubtedly increase the difficulty of financial integration after the acquisition and the pressure on short-term funding.

"Does Hutchison Whampoa know about this?" Chen Bingwen asked.

You should know.

But this is likely one of the reasons why Wealth Management is eager to get rid of Watsons, a 'non-core asset'.

He may have viewed the land as a burden, or saw no potential for appreciation in the short term, and didn't want this debt and inefficient asset to remain on Hutchison Whampoa's balance sheet, affecting his strategy of focusing on core businesses such as real estate and ports.

Fang Wenshan analyzed.

Chen Bingwen pondered for a moment, "What is the specific planned use of this land?"
Is it industrial land or some other type of land?

"The land was designated for industrial use. Watsons borrowed the money because it planned to build a new warehousing and logistics center and expand its production lines in the future, but it hasn't taken any further action since buying the land," Vincent Fang replied.

Industrial land in Yuen Long

Chen Bingwen took the investigation report from Fang Wenshan and glanced at the description and simple map of the land plot.

When he saw the words "located on the edge of Tin Shui Wai", his pupils contracted slightly, and he immediately thought of China Resources' development of Tin Shui Wai.

So he quickly walked to the huge map of Hong Kong Island on the wall and found the location of Watson's industrial land.

Chen Bingwen's gaze lingered for a moment on the outline of the land adjacent to Tin Shui Wai on the map, a look of understanding flashing across his face.

The land that Watsons bought with a loan is right next to the future Tin Shui Wai large-scale community.

Although land prices have remained low due to the issue of the ownership of the New Territories.

But Chen Bingwen clearly remembers that a few years later, with the progress of Sino-British negotiations and the gradual clarification of the New Territories land contract issue,

In particular, with the development of Tin Shui Wai New Town entering a fast track, the value of this land will experience explosive growth.

Thinking of this, he handed the document back to Fang Wenshan and said calmly, "Director Fang, perhaps we should look at this matter from a different perspective."

This land may seem like a burden now, but it could also be an opportunity.

Fang Wenshan was somewhat puzzled: "Mr. Chen, what do you mean?"

“First,” Chen Bingwen said, looking at Fang Wenshan, “this land and this loan are our strongest bargaining chips in negotiations with Hutchison Whampoa.”

Hutchison Whampoa's eagerness to divest from non-core assets is evident in the fact that these distressed assets and long-term debts have severely impacted Watsons' valuation and future cash flow, demanding greater concessions on the acquisition price.

"Williams' current focus is on his real estate and port businesses. As long as we can successfully take over Watsons, he shouldn't be too concerned about the price."

Chen Bingwen paused for a moment, then continued, "Secondly, and more importantly."

This plot of land is in Yuen Long, near Tin Shui Wai.

“Yes, Mr. Chen. I even went to the site to see it for myself. The land that Watsons bought with a loan is on the edge of the planned Tin Shui Wai New Town.”

Fang Wenshan interjected with great certainty.

Chen Bingwen nodded, "Once the development of Tin Shui Wai is fully launched, the infrastructure will catch up quickly, and roads, water and electricity, and public transportation will be improved in a short period of time."

At that time, the location of this seemingly remote industrial site will undergo a dramatic change.

It will transform from a peripheral area into a prime logistics and warehousing location adjacent to large, emerging communities, possessing extremely high strategic value!

"However, the Tin Shui Wai development is unlikely to be completed in a short period of time, and the interest expense on this loan is a real concern."

Fang Wenshan cautioned, "In the next two or three years, this land is unlikely to generate revenue; on the contrary, it will continue to deplete our cash flow."

Chen Bingwen said, "You're right, this is a real problem."

However, solving this problem is quite simple: either make preliminary plans for the land, build simple storage facilities, and rent them to surrounding factories to at least cover some of the interest expenses.

"Either pay some money to change the land use designation to commercial land and proceed with commercial development directly."

Chen Bingwen's words made Fang Wenshan's eyes light up.

Given the current trends in land and housing prices on Hong Kong Island, if the land where Watsons is located were rezoned for commercial use and developed, it could potentially generate substantial profits.

“Mr. Chen, although Yuen Long is remote now, once Tin Shui Wai is developed, the surrounding land prices will inevitably rise.”

If industrial land can be converted to commercial land, its value can increase at least three to five times.

Chen Bingwen smiled and said, "We'll consider this matter after we successfully acquire Watsons."

Furthermore, we can use the gimmick of converting industrial land into commercial land to inflate our listing valuation.

"Understood, Mr. Chen. For now, we can only treat this land as a burden to pressure Hutchison Whampoa's offer."

Fang Wenshan looked enlightened and said with a smile.

That's exactly right.

In short, we must make full use of this land to our advantage and try our best to drive down Watsons' acquisition price.

Over the next few days, as Watsons' due diligence work deepened, the full picture of this century-old company gradually became clear to Chen Bingwen.

Retail network:

72 chain pharmacies and cosmetic stores located throughout Hong Kong Island, Kowloon and the New Territories.

This is Watson's most core asset, and also the part that Chen Bingwen values ​​most.

These stores are mostly located in bustling areas, with a stable customer flow and a mature operating system.

Production assets:

A distilled water production plant located in Aberdeen, Hong Kong, has somewhat outdated equipment but operates well, mainly providing production capacity for Watsons' own brand of "Watsons Distilled Water".

A small-scale soft drink factory in Kwun Tong mainly produces traditional-flavored carbonated beverages. It has a limited market share and suffers from significant equipment aging issues.

A ParknShop supermarket chain founded in 1973, with twelve stores.

A cosmetics factory that produces products such as lipstick, face cream, talcum powder, floral water, and cooling oil.

Land assets: A piece of industrial land in Yuen Long, New Territories, covering an area of ​​about 10 acres, is the "result" of that 32 million loan.

Currently unused and overgrown with weeds.

Debt situation: In addition to this land purchase loan, Watsons also has some operating debt and lease liabilities, totaling approximately HK$18 million.

The company's overall financial situation is not healthy, and its cash flow is tight.

The overall valuation given by Wharf Holdings is HK$92 million.

This figure is based on a comprehensive assessment of Watson's current financial statements, asset status, and discounted future cash flows.

Fang Wenshan placed the valuation report on Chen Bingwen's desk and added, "Mr. Chen, when the Huoduoli team evaluated the project, they fully considered the 32 million land loan and its interest burden, as well as the potential capital expenditure required for the equipment upgrades of the two old factories."

They believe that Watsons' current profitability is severely hampered by these factors, and its cash flow will be very tight in the next few years, hence this cautious valuation.

Chen Bingwen quickly skimmed through the key parts of the report and nodded.

This valuation was somewhat unexpected for him; he had originally thought that Watsons would be worth at least HK$1 million to HK$1.2 million at this point.

Surprisingly, the valuation given by Huoduoli was only HK$92 million.

This shows that Huoduoli's assessment did indeed take into account the long-term value of Watson's brand and channels.

(End of this chapter)