Robert Kuok says empire can last generations

23 Rabiulawal 1434

WHEN billionaire Robert Kuok introduced a luxury hotel brand in 1971, he named it Shangri-La, after the fictional utopia in which inhabitants enjoy unheard-of longevity.

Ensconced in his executive suite 32 floors above Hong Kong's Victoria Harbor - the room decorated with a pair of elephant tusks gifted by the late Tunku Abdul Rahman, the first prime minister of Malaysia - the world's 38th-richest person appears to have defied the aging process himself.

Kuok has accumulated a fortune of US$19.2 billion (RM59.52 billion) as of January 31, according to the Bloomberg Billionaires Index. Trim, dapper and straight backed at 89, he shows no signs of stopping there, Bloomberg Markets magazine will report in its March issue.

This year, the media-shy Malaysian-born magnate will likely open his 71st sumptuously appointed Shangri-La. Six of them are scheduled to be opened in the third quarter alone, including one perched in the Shard, the 72-storey London skyscraper that's the tallest office building in Western Europe.


Meanwhile, the public and private companies his family controls continue to pump money into his ancestral homeland, China, where his investments range from Beijing's tallest building to cooking oil brands that have gained a 50 per cent market share in the world's most populous nation.

One of Kuok's companies, Singapore-listed Wilmar International Ltd, is the world's biggest processor of palm oil and eighth-biggest sugar producer.

Others operate shipping and logistics businesses, a property portfolio stretching from Paris to Sydney and East Asia's most influential English-language newspaper, the Hong Kong-based South China Morning Post.

"He's so vital, so active and continues to be so personally powerful," says Timothy Dattels, San Francisco-based senior partner at US buyout firm TPG Capital LP and a director of Kuok's Hong Kong-listed Shangri-La Asia Ltd. "I can't imagine a day without him at the top."

Others can, which is why the question of succession looms over the Kuok empire as the patriarch prepares to mark his 90th birthday in October.

Through the unlisted family-owned holding company, Kerry Group Ltd, which he chairs, Kuok controls listed enterprises with a total market value of about US$40 billion.

As it stands, the family enterprises are seeking to recover from a rocky 2012 that featured some sharp share-price and profit drops.

In his first interview with Western news media in 16 years, Kuok, who has eight children and numerous other relatives sprinkled through his executive ranks, says he won't be worried when that day eventually comes.

"Everything on earth is dynamic," he says in perfectly enunciated English. "I can only give my children a message, not money. If they follow it, we can go another three or four generations."

Relatives run the most important of the Kuok businesses.

Kuok's second son, Khoon Ean, 57, heads Shangri-La Asia, of which the family owns 50 per cent.

A nephew, Khoon Hong, 63, co-founded and chairs Wilmar International, the largest Kuok-controlled company, with a market value of almost US$20 billion, in which the Kuok family controls a 32 per cent stake.

A daughter, Hui Kwong, 35, is executive director of SCMP Group Ltd, publisher of the 109-year-old South China Morning Post, which Kuok took control of in 1993, when he paid Rupert Murdoch's News Corp US$349 million for a 35 per cent stake.

As to who will succeed the master, most investors in Kuok enterprises focus attention on his eldest son, Khoon Chen, 58, who's known as Beau.

Robert declined to confirm that Beau, who is deputy chairman of Kerry Group, will succeed him.

"News hounds like excitement in their stories, whereas leadership of a business group is always a serious matter, and it would be wrong to put in writing any kind of assumption," Kuok wrote in an email following the interview.

Beau, who has worked in his father's businesses since 1978, is chairman of Kerry Properties Ltd. The firm, 55 per cent owned by Kerry Group, develops luxury apartments, shopping malls and offices mostly in China and Hong Kong.

"I know Beau and he has a good team," says Peter Churchouse, founder of Hong Kong-based property investor Portwood Capital Ltd. "But you have to wonder whether the second and third generations have the entrepreneurial and trading instincts that the father has."

The father's instincts were honed over decades of personal and historical turbulence inconceivable to the generation vying to take over the family business.

That experience helped him become one of the first - and best-connected - foreign investors in China following Mao Zedong's communist revolution.

"Robert is the best China watcher in the business," says Simon Murray, chairman of Glencore International Plc, the world's biggest commodities-trading company. "He understands the steel backbone of the Communist Party, but while other Hong Kong tycoons tend to be hugely subservient to Beijing, he is in no way obsequious."

For all of Kuok's prowess, 2012 was a tumultuous year for investors in his enterprises.

While Kerry Properties stock surged 57 per cent in Hong Kong last year - more than double the increase in the Hang Seng Index - Wilmar International's shares plummeted 33 per cent, making it the worst performer in Singapore's Straits Times Index.

The plunge wiped the equivalent of more than US$8 billion from the company's market value - and almost US$3 billion from the family's fortune. This year, Wilmar's share price has rebounded, rising 14 per cent in January.

In any event, Kuok disputes Bloomberg's valuation of his personal wealth at US$19.4 billion; he says it's "a fraction" of that amount, though he does not volunteer an alternative figure.

Wilmar's woes stem from its massive exposure to China, where its cooking oil brands - led by Jin Long Yu, meaning Golden Dragon Fish - grease half the country's woks and where it gets 48 per cent of its revenue.

Beijing limited price increases on edible oils during most of 2011 and part of 2012, Wilmar said at the time.

Furthermore, the rising cost of soyabeans, which Wilmar uses to produce cooking oil, hit a record US$17.89 a bushel in September, squeezing earnings.

In the first nine months of 2012, profit fell 29 per cent to US$779 million from US$1.1 billion a year earlier.

Kuok's Hong Kong-based companies have had a rough ride since the global financial crisis.

As of January 31, Shangri-La Asia and Kerry properties shares were both down 19 per cent compared with a one per cent increase in the Hang Seng Index.

Asked about such underperformance, Kuok says enigmatically, "It is right and proper for the investor to like or dislike a share."

Underperformance isn't the only problem at SCMP Group, whose share price had declined 69 per cent as of January 30 since Kuok acquired it. In 19 years, the South China Morning Post has churned through 11 editors, including one who served twice.

And although Kuok says his news executives publish without fear or favour, present and former staff members have publicly complained that the paper sometimes self-censors stories it thinks the Chinese government wouldn't like.

If that's true, it might be a first for Kuok, whose life story has been one of single-minded achievements.

The son of Chinese immigrants who had settled in British-controlled Malaya, Robert Kuok Hock Nien - his full name - grew up speaking his parents' Chinese Fuzhou dialect, English and even Japanese during Japan's wartime occupation of the region.

Significantly, given the role China would play in Robert's life, his mother encouraged him to achieve fluency in Mandarin and embrace his Chinese heritage.

Kuok's parents ran a shop that sold rice, sugar and flour. Kuok recalls living with the smell of his addicted father's opium pipe in his nostrils.

Still, there was enough money for Robert to progress from a local English school to Raffles College in Singapore, where fellow students included Lee Kuan Yew, later the founder of modern Singapore.

Kuok never finished his studies. In 1941, Japanese troops stormed through the Malay Peninsular and in February 1942 captured Singapore.

Kuok took a job with Mitsubishi Corp. With Japan's defeat in 1945, his family resumed doing business under the British.

In 1949, after his father died, Robert; a brother, Philip; and other relatives founded Kuok Bros Sdn Bhd, which later specialised in sugar refining.

Philip went on to become a Malaysian diplomat, and a second, much-admired brother, William, took an entirely different path again by joining the communist revolt against colonial rule. In 1953, William Kuok was killed by British troops in a jungle ambush.

Robert Kuok, by contrast, used his English-language skills on visits to London to learn the sugar business, while remaining based in Malaysia and later Singapore.

During the Cold War, he traded with both Western and communist blocs, meeting Cuba's Fidel Castro and doing business with China's Mao from as early as 1959.

In 1973, with China in the grip of the Cultural Revolution, Kuok was summoned to Hong Kong for a furtive rendezvous with two of Mao's trade officials.

They confided that China was facing a sugar shortage. Kuok stepped into the breach, transferring his headquarters to Hong Kong that year.

It was a prescient move. In 1976, Mao died, and in 1978, Deng Xiaoping tore down the so-called Bamboo Curtain, initiating reforms that sparked 34 years of surging economic growth.

In 1984, Kuok opened his first Shangri-La on the mainland. The following year, he partnered with China's foreign Trade Ministry to begin building the China World Trade Centre in Beijing.

In 1988, at his nephew Khoon Hong's suggestion, he branched out into edible oils. By 1993, Coca-Cola Co was impressed enough with Kuok's China connections to form a bottling joint venture with him.

That lasted until 2008, when Coke bought back Kerry Group's stake for an undisclosed amount, both companies pronouncing the outcome a success.

The family's history of that period harbours an enduring mystery: a 16-year parting of the ways between Robert and Khoon Hong, who in 1991 left the Kuok Group to set up Wilmar with Indonesian entrepreneur Martua Sitorus.

It wasn't until 2007 that Robert acquired a 32 per cent stake in Wilmar and injected most of his agribusiness into it. Neither Robert nor his nephew would discuss the split.

For all his triumphs in the capitalist world, Robert Kuok says the biggest influences on his life were his devoutly Buddhist mother and his communist revolutionary brother, William.

Kuok says he has tried to pass on those values by not cocooning his children in privilege. Nor, he adds, does he place much emphasis on scholastic qualifications, including MBA degrees, when hiring senior staff.

Among members of the extended family, Kuok speaks highly of Khoon Hong, his nephew at Wilmar.

The perils of succession are acute in Kuok's bailiwick, according to researchers at the Chinese University of Hong Kong.

Their study of 250 family-controlled businesses in Hong Kong, Singapore and Taiwan from 1987 to 2005 shows that stocks typically plunged 60 per cent over an eight-year period before, during and after a founder's relinquishing control.

Joseph Fan, the finance professor who led the research, attributes this wealth destruction to the inability of the patriarch to pass on, even to family members, his most valuable, intangible assets, including relationships with governments and banks. "The founder is the key asset," Fan says.

That's why, Fan says, so many tycoons remain at the helm of their businesses well into their 80s and don't disclose succession plans.

TPG Capital's Dattels says succession isn't a concern when it comes to the Kuok businesses.

"There's only one Robert Kuok, there's no doubt," he says. "But he has instilled his business philosophy deep into the family. With what he has built, they are |well set to continue, whatever happens."

Back at his Hong Kong headquarters, Kuok asks an assistant to bring him a favourite quotation. Written by his mother in Chinese and engraved on a steel plate, the aphorism reads:

"If my children and grandchildren can be like me, then they don't require material inheritance. But if they are not like me, then of what use is my wealth to them?"

Those words beg the question investors in Kuok's far-flung businesses are asking now more than ever: How like Robert Kuok are his heirs?

With assistance from Shiyin Chen, Haslinda Amin and Netty Ismail in Singapore, Debra Mao in Taipei and Kelvin Wong in Hong Kong

Sources: Business Times Malaysia

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