Rebirth in Hong Kong: From Dessert Shop to Industrial Empire

Chapter 234 Financing 6K (Seeking monthly votes, recommendations, and subscriptions!)
A few days after the celebration banquet, Qingzhou Yingni released its carefully prepared interim financial report.

The report shows that after including the partial revaluation gain of the Hung Hom Crane Garden site, the company's net profit for the first half of the year reached HK$65 million, with a significant increase in earnings per share and net asset value.

This impressive financial report, which far exceeded market expectations, immediately generated a positive response in the market upon its release.

Investors saw that after the change of ownership, this long-established British trading company not only maintained the stability of its traditional business, but also demonstrated huge asset value and transformation prospects.

The story of "industrial upgrading" has begun to be accepted and sought after by the market.

Qingzhou Yingni's stock price rose in response, increasing for several consecutive trading days, and its market value steadily climbed.

According to the latest assessment by an authoritative agency, the value of the Hung Hom Crane Garden site has risen to approximately HK$1.2 billion.

Chen Bingwen was in his office in the Weiye Building, looking at the financial section of the newspaper about the stock price trend of Qingzhou Yingni, and he was in a good mood.

The rise in stock price means that the assets he controls have appreciated in value, which also creates more favorable conditions for his subsequent plans.

But this is only the first step.

He also needs to prepare more funds for the upcoming acquisition of Hutchison Whampoa.

At 10 a.m., Vincent Fang, Canning Huo, Jianming Xie, and Michael McLeish, who had returned from North America, walked into Chen Bingwen's office on time.

Chen Bingwen got straight to the point, gesturing for everyone to sit down, "It's a good thing that the stock price has risen, but our goals go beyond that."

Next, there are several important things to move forward with.

He glanced at everyone and continued, "First, it's about Hutchison Whampoa. HSBC still holds a large number of shares, and Li Ka-shing will never be content with just 10.65%."

After Bao Yugang intervened to mediate some time ago, things seemed calm on the surface, but I suspect that Shen Bi and Li Jiacheng were definitely plotting something behind the scenes.

We can't just sit and wait.

Fang Wenshan continued, "Mr. Chen, we have been accumulating Hutchison Whampoa shares in the secondary market. If we want to increase our influence, we may need a more direct approach."

“That’s right.” Chen Bingwen nodded. “So, I’m considering starting with Wei Li. Wei Li owns 6% of Hutchison Whampoa’s shares, and I plan to acquire them.”

I need to transform him from a temporary ally into someone whose interests are deeply intertwined with ours.

Mireille raised her head and said, "Williams is a professional manager who values ​​profit and power."

To truly engage him, you need a solution he can't refuse, one that demonstrates long-term value and an exit strategy, not just cash.

His analysis of the problem was incisive.

“My idea is,” Chen Bingwen said, “to exchange Qingzhou Yingni’s shares for his personal Hutchison Whampoa shares, and at the same time give him a long-term CEO renewal contract.”

This deeply ties his personal interests with the interests of our Qingzhou Yingni.

In this way, he can truly buy us time on the Hutchison Whampoa board and defend against any proposals detrimental to us.

Fang Wenshan quickly did some mental calculations and raised the key question: "Mr. Chen, the premise of this plan is that the market value of our Qingzhou Yingni must be high enough that Wei Li feels it is worthwhile to exchange his Hutchison Whampoa shares for it."

Although our market value has increased, it is still smaller than that of Hutchison Whampoa.

A one-for-one exchange would be a loss for Wei Li at this stage, and he most likely won't agree.

"Director Fang has hit the nail on the head." Chen Bingwen gave him an approving look. "So, the first major thing we need to do is to quickly and significantly increase the market value of Qingzhou Yingni and narrow the gap with Hutchison Whampoa's value ratio."

He paused for a moment to let everyone digest the information, and then slowly revealed his plan: "I intend to have Qingzhou Yingni conduct a large-scale rights issue to raise funds."

"Rights issue?" Huo Jianning asked thoughtfully.

This was a common financing method in the Hong Kong market at the time, but improper operation could easily lead to a drop in stock prices.

Yes, '5-for-1' rights issue.

The rights issue price should be at a significant discount to the market price, such as around 30%.

Chen Bingwen stated clearly, "The goal of raising funds is approximately HK$200 million."

Xie Jianming is mainly responsible for investment and is not deeply involved in the operation of the industry, but when he heard the ratio, he couldn't help but say: "5 shares for 1, a 30% discount, this is a big move. Retail investors and small shareholders may sell their shares because they need to pay extra money or because their equity is diluted, which may cause market panic."

"Therefore, we need a compelling reason that can convince the market and ensure that the rights issue can be completed successfully and cannot fail."

Chen Bingwen said confidently, "This funding will be specifically used to develop the Hung Hom Crane Garden site and transform it into a 'modern beverage and food industrial park'."

In our announcement, we promise that the dividend payout ratio will be no less than 5% within 18 months of the project's launch. This will attract retail and institutional investors who value stable returns.

MacLehose immediately grasped the key point: "This is a very positive story. The traditional cement business has stable cash flow, coupled with the concept of transforming into high-quality real estate development, and a high dividend promise."

The story itself is very engaging.

However, HK$200 million alone, based solely on this story and the dividend promise, may not be enough to completely dispel market doubts and ensure that all rights issues are subscribed.

We need stronger guarantees, or rather, we need a signal that can convince the market that 'even if someone abandons the rights issue, there is a strong backing to take over'.

This necessitates the introduction of underwriters.

In refinancing activities such as rights issues, listed companies will hire investment banks (underwriters) to underwrite the newly issued shares.

Underwriters typically promise a company that they will purchase all shares not subscribed by existing shareholders, regardless of market reaction, thereby ensuring the company can raise the predetermined amount of funds.

This is crucial for stabilizing market confidence because it eliminates the risk of a failed rights issue.

The hiring of a reputable large international investment bank as an underwriter is itself a strong positive signal, indicating that professional institutions are optimistic about the company's prospects and value.

Milis looked at Chen Bingwen and asked, "Mr. Chen, which organization are you planning to invite to be the underwriter? This is crucial."

Chen Bingwen nodded, knowing that MacLeish had hit the nail on the head: "I plan to approach international banks of the level of Citibank and Goldman Sachs."

Invite them to become distributors.

This sends a strong signal to the market.

"Mr. Chen, how do you plan to persuade Citibank and Goldman Sachs?" asked Marissa thoughtfully after hearing Chen Bingwen's words.

"Part of the funds raised will be used for a possible strategic acquisition in the future, targeting a consumer goods company with a global distribution network."

Chen Bingwen had a sharp eye: "If possible, I plan to acquire Junyi Warehouse, a subsidiary of Hutchison Whampoa, in the future."

Of course, that's a story for later. Right now, we need a story that will appeal to international investment banks, as well as... solid collateral and a promising profit outlook.

Qingzhou Yingni's assets and cash flow, combined with our team, are the best tools for persuasion.

After the meeting, Chen Bingwen instructed Fang Wenshan and Mai Lisi to take the lead in immediately preparing the rights issue plan and materials to be provided to investment banks.

Huo Jianning and Xie Jianming will continue to be responsible for monitoring market reactions and fund allocation.

A few days later, Chen Bingwen met with Wei Li privately in the Peninsula Hotel's coffee shop.

He didn't beat around the bush and directly proposed a "share swap + long-term contract" solution.

After listening, Wei Li held his coffee cup and pondered for a long time.

“Mr. Chen, your proposal is very bold. But I must say, the current stock price of Qingzhou Yingni is not enough to entice me.”

"Using my actual Hutchison Whampoa shares to exchange for shares in a company with a promising future but questionable valuation—that carries risks..."

“I understand your concerns, Chairman Wylie.”

Chen Bingwen calmly responded, "Therefore, we are planning a rights issue with the goal of pushing Qingzhou Yingni's market value to a new level in the short term."

At that time, the share swap ratio and your returns will be completely different.

What I need is your intention, a commitment that you are willing to seriously consider this matter once we achieve our goal.

This is a win-win situation for both of us.

Wei Li looked at Chen Bingwen, seemingly assessing the credibility of his words.

"Rights issue? How large?"

"5 units will be supplied to 1 unit, raising approximately 200 million HKD for the development of the Hung Hom site."

Citigroup and Goldman Sachs may participate in the underwriting.

Chen Bingwen revealed some information.

A hint of surprise flashed in Wei Li's eyes. He hadn't expected Chen Bingwen to act so quickly and with such a grand gesture.

If a top investment bank were to underwrite the deal, the probability of success would indeed increase significantly, and the stock price would likely rise accordingly.

He pondered for a moment and said, "If the rights issue is successful, the market value can reach a new height as you said... I can agree in principle to explore this proposal."

But before that, everything was just preliminary.

“That’s enough.” Chen Bingwen extended his hand. “It’s been a pleasure doing business with you, Chairman Wei Li.”

"Pleasant to work with."

Wei Li shook hands with Chen Bingwen. He knew in his heart that he had been tied to Chen Bingwen's chariot. At least in the current common goal of fighting against Li Jiacheng, their interests were aligned.

After meeting with Wesley, Chen Bingwen immediately met with Li De, head of Asia finance at Citibank, and Mark, co-head of Asia finance at Goldman Sachs.

These two banks have long had deep connections with Chen Bingwen.

Therefore, after learning that Chen Bingwen wanted Citibank and Goldman Sachs to underwrite the 5-for-1 rights issue of Qingzhou Yingni, they all showed great interest.

However, Citigroup and Goldman Sachs responded almost simultaneously, requiring Sugar Capital, as the major shareholder, to commit to fully subscribing to its rights issue and to provide some form of guarantee or collateral for the portion it underwrites, in order to ensure the success of the rights issue and avoid underwriting risks.

This request was exactly what Chen Bingwen had expected.

He had previously asked Vincent Fang to calculate that, based on Sugar Heart Capital's existing shareholding ratio in Qingzhou Yingni, a 5-for-1 rights issue would require more than HK$80 million in cash to subscribe for its own shares.

Although the pressure is considerable, it is not impossible to accomplish.

However, the 80 million in cash, plus the potential for additional guarantees, will be a significant test for Sugar Heart Capital's cash flow.

Although gold investment can yield considerable unrealized profits, it's just paper money that can't be easily accessed.

The North American and mainland China markets are still in the investment phase, and their contribution of net cash flow is limited.

He needs a new, larger source of funding, and he needs it quickly.

At that moment, an idea became clear in his mind: to completely divest himself of the cement business in Qingzhou Yingni.

He had thought of this move long ago, but now the timing was just right.

While Qingzhou Yingni's cement business is stable, its profits are meager, its assets are heavy, and its connection to the company's future real estate and investment focus is decreasing. Selling it would not only provide a large sum of cash upfront but also allow Qingzhou Yingni to completely streamline its operations, becoming a purer real estate investment and holding platform with a clearer valuation logic, which would be more conducive to its subsequent industrial development.

Who can take over?

Who can absorb such a large traditional industry?

And ideally, transactions should be quick?
He thought of China Resources.

As a window company for the mainland, China Resources needs to expand its industrial base and cash flow in Hong Kong.

Cement is a basic building material, which aligns with China Resources' trade and industrial layout.

Meanwhile, China Resources' Tin Shui Wai development project itself requires a huge amount of cement for construction.

With that in mind, he decided to test China Resources' attitude first.

The next afternoon, Chen Bingwen arrived at the China Resources Building.

This time, he didn't look for Li Guowei, but went directly to Zhang Jianhua's office.

Thanks to his position as a special advisor for the China Resources Tin Shui Wai project, Zhang Jianhua's secretary directly led him into the office.

"Mr. Chen, what a rare guest. I heard you've been making some big moves lately; Qingzhou Yingni's financial report looks very good."

Zhang Jianhua smiled and stood up to greet him, inviting him to sit down and have some tea.

"Mr. Zhang, you flatter me. It's just the beginning." After a few pleasantries, Chen Bingwen got to the point: "Mr. Zhang, I'm here today to discuss a business deal with China Resources regarding the cement business in Yingni, Qingzhou."

"Oh?" Zhang Jianhua put down his teacup, intrigued. "I remember the cement factory in Yingni, Qingzhou. It's an old, well-established factory."

"Yes, we have a factory and cargo terminal in Hung Hom, and we have stable profits and cash flow every year."

Chen Bingwen frankly stated, "As you know, Chenji's main business is fast-moving consumer goods, and the cement business segment is somewhat deviating from our future strategic focus."

Therefore, after evaluation, we are considering divesting and selling the entire cement business segment.

Zhang Jianhua pondered for a moment and said, "Sell off... Mr. Chen, this is quite a large deal."

How do you plan to sell it?

"It's all packaged together," Chen Bingwen stated clearly, "including the old factory land and equipment in Hung Hom, all trademarks, patents, customer contracts, and the operations team."

China Resources not only needs a huge amount of cement for its Tin Shui Wai project, but also needs cement business to support its future development of real estate business on Hong Kong Island.

Therefore, the first thing that came to mind when I was preparing to sell my cement business was China Resources.

He paused, looked at Zhang Jianhua and said, "I thought of China Resources first for several reasons."

First, China Resources' Tin Shui Wai project is about to commence large-scale construction, requiring a massive amount of cement. If they own their own cement plant, they can effectively control costs and ensure supply.

Secondly, for China Resources to develop its real estate business in Hong Kong Island, having its own source of building materials can enhance the synergy of the industrial chain and its ability to resist risks.

Third, and most importantly,

Chen Bingwen lowered his voice, "The mainland is currently in dire need of reconstruction, and infrastructure construction has just begun. The demand for cement is enormous, to the point of being insanely short."

However, the current cement production capacity, quality, and technology in mainland China are unlikely to fully meet the demand in the short term.

If China Resources can control a mature cement plant on Hong Kong Island, it can not only supply the local market in the future,

Furthermore, its special status allows it to become an important bridge for transporting high-quality cement and technology to the mainland.

Mr. Zhang should understand the strategic value of this better than I do.

As Zhang Jianhua listened to Chen Bingwen's words, his eyes grew brighter and brighter.

Chen Bingwen's words struck a chord with him.

The Tin Shui Wai project does need cement, but the more far-reaching market in mainland China is what matters even more.

Controlling a cement plant with a brand, technology, and port transportation capabilities is of great significance to China Resources' future industrial layout and domestic and foreign trade.

Zhang Jianhua did not answer immediately, but tapped his fingers lightly on the sofa armrest as he pondered quietly.

China Resources does need more real assets. Although the cement industry is traditional, its demand is stable and it can provide continuous cash flow and profits, which is in line with the company's diversified business strategy.

Moreover, acquiring the established brand Qingzhou Yingni is of landmark significance for China Resources' industrial layout in Hong Kong.

The most crucial factor is the mainland market, which Chen Bingwen mentioned.

“Mr. Chen, your suggestion is indeed very attractive.” Zhang Jianhua said slowly, “You’re right about the situation in the mainland. Everything is in need of rebuilding, and construction is underway everywhere. Cement is a hard currency, and there’s an endless supply. The shortage is truly insane.”

Factories on Hong Kong Island have far more advanced technology and management than those on the mainland. If distribution channels can be established, the value would be enormous.

He then changed the subject, saying, "However, acquiring the entire cement business involves a considerable amount of capital, and cement plants are heavy assets with outdated equipment and significant environmental pressures. The subsequent relocation and renovation costs will also be substantial."

China Resources needs to undergo a detailed evaluation and assessment.

“That’s natural,” Chen Bingwen said, expressing his understanding. “Regarding the price, we can discuss it based on a reasonable market valuation.”

Based on existing assets, profitability, brand value, and discounted future cash flow, our preliminary assessment is that the reasonable value is between HK$450 million and HK$500 million.

Considering the strategic significance of cooperating with China Resources and the synergistic effects in the future mainland market, we can accept the offer of HK$480 million.

Payment methods are negotiable.

The key question is, does China Resources have the strategic resolve to do this?

"Four hundred and eighty million..." Zhang Jianhua silently weighed the options.

This price isn't low, but if it can truly open up access to the mainland market, its long-term value will be enormous.

"Mr. Chen, to be honest, this direction aligns with the long-term plans of China Resources headquarters."

But such a large transaction cannot be decided by me alone; it needs to be reported to the headquarters in Beijing for approval.

Furthermore, how to finance the acquisition—whether in Hong Kong dollars or foreign currency—requires comprehensive planning.

He pondered for a moment and gave a preliminary suggestion: "In that case, you send over the detailed information first, and I will immediately organize a team to conduct an evaluation and report back to the country."

Once the above principles are agreed upon, we can begin substantive negotiations. What do you think?

“No problem.” Chen Bingwen extended his hand. “Mr. Zhang, I’ll wait for your good news.”

Hopefully, we can expedite this process.

“Me too.” Zhang Jianhua shook hands firmly with Chen Bingwen.

After leaving the China Resources Building, Chen Bingwen sat in his car, feeling a little more at ease.

Zhang Jianhua's positive attitude shows that the direction is correct.

He was familiar with the procedures of state-owned enterprises, which involved multiple layers of approvals that took time, while his rights issue plan couldn't wait much longer.

He needs to prepare for both possibilities.

If the rights issue is successful, Qingzhou Yingni's market value will soar, making the subsequent sale of its cement business and the share swap with Weili much smoother.

At the same time, Li Jiacheng was also closely monitoring Chen Bingwen's movements.

The continued rise in Qingzhou Yingni's stock price made him uneasy.

He sensed the presence of capital operations.

"What is Chen Bingwen up to now?"

In the Cheung Kong Holdings office, Li Jiacheng spoke to Zhou Jinqian and Hong Xiaolian.

"Mr. Li, with the market value of Yingni in Qingzhou rising, Chen Bingwen has even more capital at his disposal."

I'm worried he might take even bigger actions against Hutchison Whampoa next.

Zhou Jinqian said with concern.

"Any new information from HSBC?" Li Jiacheng asked Hong Xiaolian.

Sir Michael Sandberg stated that there are still differing opinions within the HSBC board regarding the disposal of the remaining Hutchison Whampoa shares, and time is needed for coordination.

Hong Xiaolian reported, "However, he hinted that if we could offer more favorable terms, the progress would be faster."

Li Jiacheng frowned.

More favorable terms mean more cash is needed, and Cheung Kong's current cash flow is not tight.

Chen Bingwen's relentless pressure forced him to quicken his pace.

“Continue to communicate with HSBC; the terms can be discussed further,” Li Jiacheng instructed. “Also, have our people keep an eye out for other institutions in the market willing to transfer their Hutchison Whampoa shares; even if the number is small, we should try to secure them.”

"Yes, Mr. Li." Just as Chen Bingwen and Li Jiacheng were secretly vying for power, Hong Kong's financial media also began to sense something unusual.

Several newspapers published analytical articles in their financial sections, speculating that the recent unusual stock price movements of Qingzhou Yingni may indicate a major capital operation, with some even linking it to the equity dispute with Hutchison Whampoa.

Although the details were vague, the market's nerves have been touched.

Chen Bingwen saw these reports and was not surprised.

The capital market has a keen sense of smell.

He instructed the public relations department to pay attention to public opinion and, if necessary, to release some vague but positive information to guide market expectations.

A few days later, the preliminary plan for the Qingzhou Yingni rights issue was placed on Chen Bingwen's desk.

Vincent Fang and Michael Liszt did a lot of work, and the plan was very detailed, including the rights issue ratio, price range, use of funds, and dividend commitments.

“Mr. Chen, according to our calculations, if we implement a 5-for-1 rights issue with a 30% discount to the market price, we can raise approximately HK$2.1 million.”

Fang Wenshan reported.

Just then, Secretary Ali knocked on the door and came in: "Mr. Chen, Mr. Zhang's secretary from China Resources called and said that Mr. Zhang hopes to meet with you again tomorrow morning to discuss the cement business."

Chen Bingwen's heart skipped a beat; it seemed that China Resources had made preliminary progress in their assessment.

"Reply to them that I will be waiting for General Manager Zhang in my office at 10:00 AM tomorrow."

The next morning, Zhang Jianhua arrived at Weiye Building on time.

(End of this chapter)