Jardine Matheson

[winston]

Reorganized under Simon Keswick in the 1980s

The defensive actions required during 1980 forced Jardine Matheson to sell its interest in Reunion Properties to raise cash. Newbigging was criticized for being too conservative and placing too much emphasis on local and regional operations. Although members of the Keswick family attempted to have Newbigging removed, perhaps no one worked as tirelessly as John Keswick.

Newbigging finally stepped down as senior managing director in June 1983, but retained the titular position of chairman. He was replaced as taipan by 40-year-old Simon Keswick, brother of Henry Keswick.

The election of Simon Keswick, who had not yet proved his business acumen, initially worried many investors of Jardine Matheson. Upon taking control, however, Simon moved decisively to reduce the company's debts and to place Hongkong Land on firmer financial ground.

To raise cash, he authorized the sale of Jardine Matheson's majority stake in Rennies Consolidated Holdings, a South African hotel, travel, and industries group based in Johannesburg, for $180.1 million. Keswick also established a new decentralized system of managerial control, which split operations into a Hong Kong and China division and an international division.

[winston]

In early 1984 David Newbigging was replaced as chairman by Simon Keswick. With the company now thoroughly under Keswick family control, Simon announced on March 28 that Jardine Matheson & Company would establish a new holding company called Jardine Matheson Holdings Limited, incorporated in Bermuda.

The announcement came at an extremely sensitive point in negotiations between the British and Chinese governments on the future of Hong Kong. Many observers regarded Keswick's plan as an attempt to remove Jardine Matheson from the uncertain business environment in Hong Kong, and as a solid display of no confidence in the Sino-British arrangement under which China would resume sovereignty over Hong Kong on July 1, 1997.

In defense of his actions, Simon Keswick admitted that Bermuda provided Jardine Matheson with a more stable operating environment than Hong Kong, but noted that the company was not abandoning its interests in Hong Kong, merely reducing its exposure there from 72 percent of total assets to a planned 50 percent. In addition, he pointed out that Bermuda (a British colony since 1612) permitted companies to purchase their own shares, a practice not allowed in Hong Kong.

[winston]

In 1984 Jardine Matheson disposed of its sugar interests in Hawaii. The company also expanded into motor vehicles by investing in Mercedes-Benz distributorships, which eventually led to the formation of Jardine International Motors Management Ltd.

The following year Keswick announced that, after 153 years, Jardine Matheson would leave the shipping business and that the company's fleet of 21 ships would be sold. By the end of the year many of the assets Jardine Matheson acquired during the 1970s had been sold, reducing holdings by 28 percent.

In 1986 Keswick dismantled much of Hongkong Land, selling the company's residential real estate portfolio and announcing that its Dairy Farm food subsidiary and Mandarin Oriental Hotels unit would become independent and be listed on the Hong Kong stock exchange.

Keswick's plan to reduce Hongkong Land to real estate alone caused its managing director, David J. Davies, to resign in protest

[winston]

Renewed fears of a takeover attempt led to additional 1986 restructuring moves. Jardine Strategic Holdings Limited, placed on the Hong Kong stock exchange, was formed to hold stakes in Jardine Matheson Ltd. (the Hong Kong-based arm responsible for managing the activities of the group), Dairy Farm, Hongkong Land, and Mandarin Oriental. Jardine Pacific Ltd. was formed as the trading and services arm of the group.

Simon Keswick announced in June 1987 that he would relinquish the position of senior managing director to a 37-year-old American named Brian M. Powers. The nomination of Powers to become taipan caused great concern among members of the company's more traditional Scottish establishment.

Keswick, who had reversed the company's decline with drastic and unpopular measures, and who had yet to demonstrate their success, defended his choice of Powers. He explained that Jardine Matheson was now an international company with Hong Kong interests (rather than the other way around) and that, as such, Powers was best qualified to manage its affairs.

[winston]

Moderately Successful International Expansion During the Late 1980s and 1990s

In any case, Powers's reign proved to be short-lived and well into the 1990s, Simon and Henry Keswick essentially managed the group from London. Continuing to be wary of the fast-approaching return of Hong Kong to Chinese control Jardine Matheson during the late 1980s and early 1990s was determined to become more geographically diversified, subsequently meeting with middling success in its ventures in North America, Europe, and areas of Asia outside Hong Kong and China.

In 1987 Jardine Matheson announced that it planned to buy a 20 percent stake in Bear Stearns but pulled out following that year's October stock market crash; following resulting shareholder lawsuits, it settled with shareholders of Bear Stearns four years later by agreeing to pay US $60 million in compensation.

In 1993 Jardine Matheson spent £300 million to acquire a 26 percent stake in Trafalgar House, a construction, engineering, and shipping conglomerate based in the United Kingdom. Trafalgar, a group more troubled than it was believed to be, became an albatross around Jardine's neck.

After supporting its investment and attempting to turn it around for several years, Jardine Matheson decided to cut its losses in 1996, that year selling its stake to Kvaerner A/S, a Norwegian-based shipbuilder, at a loss of about £100 million.

[winston]

During the early 1990s, Jardine Matheson also acquired a 23 percent stake in Cycle & Carriage Ltd., a Singapore-based company with motor vehicle operations in Singapore, Malaysia, Australia, and New Zealand and property investment and development activities in Singapore and Malaysia.

India was another area of Jardine Matheson growth, most significantly with the 1996 purchase of a 20 percent stake in Tata Industries of India for 1.25 billion rupees (US $25 million). The privately held Tata boasted of numerous alliances with foreign companies--including AT&T, IBM, Singapore Airlines, and Mercedes-Benz, the last of which had connections with Jardine Matheson--but Jardine Matheson was the first outsider granted a stake in the group.

Tata had several areas of interest in common with Jardine, including motor vehicle distribution, retailing, and property development. Jardine Matheson's Tata stake built on the group's previous investments in India, which included a number of joint ventures and a five percent stake in Housing Development Finance Corporation of Mumbai, a leading Indian financial institution. Overall, India had the potential to provide Jardine Matheson with the second beachhead it had sought--unsuccessfully--for so long.

Meanwhile, the group's rocky relationship with China continued in the early 1990s. Still concerned about possible takeover attempts, Jardine Matheson sought an exemption from Hong Kong's takeover code, which conflicted with takeover legislation enacted in Bermuda, but was refused.

In response, the group in 1991 moved its primary stock exchange listing from Hong Kong to London, thereby enabling Jardine Matheson to remain under the British legal system. Chinese authorities were angered, feeling that the move reflected a lack of confidence in the post-transfer-of-control legal system.

The following year, perhaps in retaliation, China blocked a consortium led by Jardine Matheson that had gained development rights to Hong Kong's ninth container terminal. Then, in late 1994, Jardine Matheson moved its Asian stock listing from Hong Kong to Singapore, provoking further consternation among the Chinese.

[winston]

Relations seemed to improve somewhat during 1995. Jardine Matheson's new managing director in Hong Kong, Alasdair Morrison, another Scot, issued a general apology to China in January 1995 over the group's actions in recent years.

Morrison emphasized that Jardine Matheson intended to continue to do business in Hong Kong and China and to invest additional money there. By 1996 Jardine Matheson had about 70 joint ventures in China, a number that had been growing rapidly. And, that year, Jardine formed a consortium with Li Ka Shing's Hutchison Whampoa and Cosco Pacific, which was owned by China's largest shipping group, to develop and run a river trade terminal.

In early 1997, Jardine Matheson's insurance broking subsidiary, JIB Group plc, of which Jardine Matheson held 60 percent, merged with the insurance broking group Lloyd Thompson Group plc to form Jardine Lloyd Thompson Group plc. Jardine Matheson held an initial 34 percent interest in the new firm. In June 1997 takeover speculation arose once again when two companies owned by Li Ka Shing bought 3.03 percent of Jardine Matheson Holdings and 3.06 percent of Hongkong Land.

The Jardine Matheson of the transfer year of 1997 was still closely tied to Hong Kong, where more than half of its profits were generated, but had developed increasing interests elsewhere in China and outside the region, most notably in India.

The group is likely to continue to seek opportunities for expansion outside Hong Kong and China, but the seemingly improved relations with China boded well for Jardine Matheson's numerous interests in that burgeoning state. Nevertheless, the recurrent takeover threats and rumors continued to hang over Jardine Matheson, clouding its future.

[winston]

This stock never failed to disappoint. When markets are crashing, it's a stabilizing factor. Up 3% now when the whole world is dropping ...

[Aspellian]

This stock never failed to disappoint. When markets are crashing, it's a stabilizing factor. Up 3% now when the whole world is dropping ...

real stabilising factor or artificially stabilising the market?? i also noticed this counter. low volume but somehow masterfully managed to prop up indexes.


PS: hi winston, thanks for posting the articles on history of jardine. i enjoyed reading the articles. its a real eye opener.

[millionairemind]

This stock never failed to disappoint. When markets are crashing, it's a stabilizing factor. Up 3% now when the whole world is dropping ...

The BBs are not out yet... so they need to hold up the index to unload the stocks on their hands to aunties/uncles and retail investors who will bear the brunt of this selldown...

The retail investors are almost always the last to join the party.