In Hong Kong, we build a global business empire

Chapter 796 Hong Kong Tycoon vs. Wall Street Mogul

When Lin Haoran returned to Shi Xundao Villa, it was already past seven o'clock in the evening.

As Guo Xiaohan helped him take off his coat, He Shanheng called.

Lin Haoran picked up his mobile phone, pressed the answer button, and He Shanheng's slightly tired but relaxed voice came through:
"Haoran, I just returned from the Governor's Mansion. The matter is basically settled."

"Uncle He, you've worked hard. How exactly is it going?" Lin Haoran walked to the window and looked at the lights of Victoria Peak outside.

He Shanheng replied: "Sir Merrihau's initial attitude was indeed quite tough. He emphasized the importance of maintaining social stability and protecting the employment of British citizens, and expressed 'serious concern' about HSBC's sudden dismissal of more than 400 British employees."

The implication was that our handling of the situation was too harsh and could damage Hong Kong's reputation for a good business environment.

Lin Haoran listened quietly without interrupting.

"As you wished, I first presented John Bao and his team with a detailed report, which clearly recorded the entire process of how Richard and others colluded, how they openly made unreasonable demands at the meeting, and how they attempted to coerce the management with a collective resignation."

I emphasized that this is not a regular layoff, but a blatant challenge to management's authority. If we compromise, HSBC will be unable to operate normally, ultimately harming the interests of all shareholders and employees, including the many British staff still on the job.

He Shanheng paused for a moment, then continued, "Then, I emphasized that it was thanks to Sir Merrihau's enthusiastic mediation that our Hengsheng Group 'reluctantly' took on the task of acquiring HSBC in order to maintain the financial stability of Hong Kong."

Our original intention was to stabilize and develop HSBC, but we never expected to encounter such difficult internal resistance so soon after taking over.

If the Governor General's Office is unfairly criticized for dealing with these provocateurs, the outside world may question the wisdom of its initial push for the deal, and even believe that the Governor General's Office is unable to guarantee basic business order.

This will likely have a negative impact on the prestige of the Governor-General's office.

"Sir Merrihow's expression changed several times upon hearing this," He Shanheng said with a hint of a smile. "He remained silent for a long time, and I took the opportunity to explain to him our future development plans for HSBC."

He emphasized that we would protect the rights of all law-abiding employees and increase investment in Hong Kong to create more job opportunities. Ultimately, his attitude softened.

"What did he say?" Lin Haoran asked.

He expressed his understanding of the difficulties faced by the company's management, but also hoped that we could "handle the aftermath properly," such as paying the full amount of severance pay in accordance with the law, to avoid triggering greater social disputes.

He also hinted that as long as there are no further large-scale layoffs targeting British nationals, the Governor's Office will not deliberately create difficulties in areas such as banking approvals.

"Let's consider this matter closed," He Shanheng concluded.

Lin Haoran smiled with satisfaction: "Uncle He, well done! We've finally gotten past the Governor's Mansion."

Compensation is not a problem; we'll pay whatever the law and contract stipulate. As long as these people are cleared out, spending some money is worthwhile.

“Yes, we paid for peace and quiet, and we also bought room for future reforms,” He Shanheng said with emotion. “McLee Ho is a smart man. He knows that pushing us too far will not be good for Hong Kong’s stability and development, especially during this sensitive period.”

His own political achievements and reputation are more important than those hundreds of clueless foreign employees. I heard that Mr. Richard Harrison, the former general manager of the corporate credit department of Huifeng Bank, has already organized a group to protest in front of the Governor's House tomorrow morning. I believe the Governor will reach an agreement with those hundreds of fired employees.

"That would be perfect!" Lin Haoran said with a smile.

After hanging up the phone, Lin Haoran felt much better.

With the potential threat from the Governor's Office largely eliminated, he could focus more on the upcoming negotiations with Citibank.

In the blink of an eye, a night had passed.

On the afternoon of October 27, Hong Kong Kai Tak Airport was still a bustling scene.

Huge Boeing passenger planes took off and landed dramatically on the runway along Victoria Harbour, the roar of their engines mingling with the salty smell of the sea breeze.

Lin Haoran, accompanied by Ma Shimin and several bodyguards, stood at the exit of the VIP passage.

He was dressed in a well-tailored dark suit, exuding composure, and calmly gazed toward the exit.

Although Citibank's Hong Kong branch had certainly made all the necessary arrangements for the leader from headquarters, he still came to greet John Reed in person, both out of respect for his old friend and to demonstrate his sincerity to Citibank.

"Boss, John Reed's flight has landed," Ma Shimin said in a low voice, glancing at his watch.

Lin Haoran nodded slightly: "Okay, get the car ready and head straight to the Mandarin Oriental Hotel."

Before long, John Reed's familiar figure appeared at the entrance of the passage.

He looked somewhat tired; the long flight had clearly taken its toll, but his sharp eyes still gleamed with shrewdness.

He was followed by two assistants carrying briefcases, walking briskly.

"Mr. John, welcome back to Hong Kong!" Lin Haoran greeted him with a warm smile and extended his hand.

John Reed was clearly surprised to see Lin Haoran come to greet him in person.

“Mr. Lin!” John Reed quickened his pace, shook hands firmly with Lin Haoran, and said with emotion, “It’s too kind of you to come and pick me up in person.”

It doesn't seem like long has passed since we last met, but Mr. Lin's business empire has expanded considerably! His words carried a subtle, almost imperceptible, probing tone.

Lin Haoran laughed loudly and patted John Reed's arm: "Mr. John, you and I are old friends, no need to be so formal. The car is ready, let's talk on the way."

Originally, someone from Citibank's Hong Kong branch was supposed to greet John Reed, but upon seeing this, John Reed immediately sent the branch's staff back.

The group boarded a vehicle and left the bustling airport.

The interior is spacious and comfortable, isolating it from outside noise.

"Was the flight successful?" Lin Haoran asked.

"It went fairly smoothly, but the distance was just too far." John Reed rubbed his temples, then got straight to the point, "Mr. Lin, I won't beat around the bush."

The reason I rushed here is because headquarters is paying close attention to Hengsheng Group's acquisition of Huifeng Bank.

Lin Haoran remained calm and said casually, "Oh? The Huifeng acquisition case has actually alarmed Citibank headquarters? I'm a little surprised. This transaction is mainly to consolidate Hengsheng's foundation in Hong Kong and Southeast Asia."

"What, does Citibank think this will affect our cooperation?"

John Reed looked directly at Lin Haoran: "Affect the cooperation? Not at all. We have always valued our partnership with Mr. Lin and Hengsheng Group."

However, it seems that Huifeng Bank also owns an American bank—HSBC?

Lin Haoran understood immediately; they had indeed come for Haifeng.

This was almost exactly what they had predicted.

He showed a moment of realization, followed by a hint of helplessness: "So it was for Haifeng Bank. To be honest, this is an unexpected bonus."

Our acquisition of Huifeng Bank was unexpected in itself. As for Haifeng Bank, it was brought in along with the assets packaged with Huifeng. From our initial understanding, the situation of this bank in New York State seems somewhat complicated.

He deliberately concealed his true intentions, instead giving the impression that he was making a preliminary assessment, or even that he saw it as an "opportunity".

John Reed carefully observed Lin Haoran's expression, trying to glean something from it.

Turning to Lin Haoran, his tone became serious: "Mr. Lin, please allow me to speak frankly, the situation at Haifeng Bank is probably much more serious than the word 'complex' suggests."

We at Citibank and SITC are both based in New York State, so we know its inside story very well. Its problems are fundamental.

“Mr. John, you must be tired from your journey. I’ve already booked a room for you at the Peninsula Hotel. How about we talk after you’ve rested?” Lin Haoran said with a smile.

“No, Mr. Lin, to be honest, I have to go to Singapore tomorrow. For a position like ours, I’m already used to this pace.” John Reed waved his hand, a hint of helplessness in his voice. “Let’s talk business first.”

Lin Haoran nodded understandingly: "In that case, let's go directly to the hotel to talk."

The car arrived at the Peninsula Hotel in Tsim Sha Tsui.

Lin Haoran had already prepared the best suite for John Reed and arranged a small welcome banquet.

The reason for arranging this hotel, rather than the Mandarin Oriental in Central, was mainly because John Reed had just experienced a long flight, and choosing the Peninsula Hotel, which is closer to the airport, was indeed more considerate.

Moreover, the Peninsula Hotel is undoubtedly the king of luxury hotels in Hong Kong.

The banquet was held in the suite's dining room, a private setting conducive to in-depth conversation.

After a few rounds of drinks and several dishes, the conversation naturally returned to Haifeng Bank.

John Reed felt a little anxious when he saw that Lin Haoran seemed to have little understanding of Haifeng Bank's predicament.

He put down his knife and fork and said solemnly, “Mr. Lin, as a friend and close partner, I must remind you that Haifeng Bank’s main business structure is extremely unreasonable. Its credit business is highly risky, and its savings base is weak. In an economic downturn, it is like a leaky ship. Huifeng Bank initially acquired it because it was interested in its retail network, but it has proven to be a mistake. Haifeng Bank not only failed to help Huifeng open up the US retail market, but also became a burden that required constant financial support.”

Lin Haoran nodded thoughtfully, his brows furrowing slightly, as if he were seriously considering John Reed's words.

He sighed softly and said, "Mr. John, thank you for your frankness. To be honest, there are indeed differing opinions within the group regarding how to handle Haifeng Bank."

Some executives believe that this may be an opportunity for Hengsheng Group to officially enter the US market based on its own capital strength, after all, Haifeng already has a considerable number of outlets and customer base in New York State.

While it's true, as you've mentioned, there may indeed be some issues with the quality of these outlets and customers.

His words were half true and half false, expressing both internal "disagreements" and a hint of "unwillingness" and "willingness to take a risk."

Sure enough, John Reed's expression became even more serious when he heard the words "entering the American market".

He waved his hands repeatedly: "Mr. Lin, this is a very dangerous idea! The barriers to entry and the intensity of competition in the American banking market are far beyond what outsiders imagine."

The banking laws of various states, especially the single-bank system, were extremely unfriendly to outsiders. Haifeng Bank was confined to New York State, while outside were the territories of giants like Citibank, Morgan Stanley, and Mellon Bank, making it impossible for it to expand.

As an outside capital, Hengsheng Group will find it difficult to change this situation even if it invests huge sums of money; instead, it will be mired in difficulties.

The US government, regulatory agencies, and even the financial groups behind major financial conglomerates, such as Squid Capital, will not welcome a Chinese-dominated banking group growing too large in the US.

He paused, then emphasized, "In my view, investing precious resources in the bottomless pit that is Haifeng Bank is a major strategic mistake."

It will only distract Hengsheng Group and hinder your development in other more promising markets around the world, such as East Asia, the Middle East, and Southeast Asia.

This is quite different from the shrewd and forward-thinking investment style that we at Citibank have always known about, Mr. Lin.

Seeing John Reed's eager expression, Lin Haoran knew that the time was almost right.

He rubbed his temples as if in distress, leaned back in his chair, and said in a tone that sounded like he was asking for advice: "Mr. John, now that you mention it, the problem is indeed more serious than I thought."

So, in your opinion, how should we deal with this 'hot potato'?

We can't just let it rot in our hands right after taking over; that would be a blow to the reputation of Huifeng Bank, and even our Hengsheng Group.

A glint flashed in John Reed's eyes; this was the opportunity he had been waiting for.

He cleared his throat and adopted a sincere attitude: "Mr. Lin, the best way is to take advantage of the current positive market reaction to the news of your takeover of Huifeng and decisively divest it."

To demonstrate Citibank's sincerity and commitment to maintaining our strategic partnership, we are willing to take over SITC Bank.

He proposed a plan that he had already discussed with the chairman of the board at the New York headquarters: "The specific method could be this: Hengsheng Group would contribute its 51% stake in Haifeng Bank as capital, and Citibank would exchange it by issuing new shares equivalent to about 3% of the current total share capital."

In this way, Hengsheng Group not only shed its burdens but also officially became a strategic shareholder of Citibank, making our interests even more closely intertwined.

This is far wiser for Hengsheng Group's future globalization strategy, especially its entry into the US market through Citibank's network, than directly operating Haifeng Bank.

The foreshadowing inside the car and during the banquet was now fully revealed.

John Reid, representing Citibank, aimed to eliminate potential competitive threats and attempted to acquire HTC's branch network in New York State at a relatively low cost.

After listening, Lin Haoran remained silent for a moment, his face revealing neither joy nor anger.

He gently swirled the wine in his glass, his gaze fixed on the shimmering liquid, as if carefully weighing his options.

After a long pause, he looked up at John Reed, a meaningful smile playing on his lips: "John, my friend, your plan sounds very advantageous to us, but upon closer inspection, it seems that Hengsheng is at a disadvantage."

John Reed's heart tightened, but he maintained his composure: "Mr. Lin, what makes you say that? Isn't the value and future potential of a 3% stake in Citibank more attractive than that of a struggling Haifeng Bank?"

To my knowledge, your group successfully acquired HSBC Bank for only HK$10 billion, which is less than US$2 million. Our acquisition of SITC Bank using a 3% stake in Citibank is, in my opinion, a very reasonable price.

Lin Haoran shook his head and replied calmly, "The accounts can't be calculated like that. First of all, Huifeng Bank previously spent US$3.41 million in cash to acquire 51% of Haifeng Bank's shares, which is a verifiable market transaction price."

Citigroup's current market capitalization fluctuates around $40 billion. A 3% stake is worth approximately $1.2 million. Exchanging $3.41 million worth of assets for $1.2 million in equity—this deal simply doesn't seem fair.

Currently, the market capitalization of banks in the United States is generally low.

The biggest obstacle is the restrictions imposed by various states on the interstate expansion of the banking industry.

This is why none of the top 20 publicly listed companies in the United States are banks.

Citibank, even though it's considered the largest bank in the United States, is only ranked in the top fifty.

He paused, then continued to apply pressure: "Secondly, as you said, I did only spend HK$10 billion to acquire the entire Huifeng Bank, but this was a bargain price based on the special circumstances of Huifeng's current predicament and Standard Chartered's eagerness to divest, and it included Huifeng Bank's overall debt situation."

Therefore, one cannot simply use this total price to infer the value of one of the assets, Haifeng Bank. If calculated proportionally, the value of Haifeng Bank's 51% stake in Huifeng's total assets is far more than US$1.2 million.

John Reed attempted to argue: "Mr. Lin, Huifeng acquired Haifeng at a premium, and Haifeng Bank is in a worse situation now than it was then; its actual value has shrunk significantly..."

Lin Haoran raised his hand to interrupt him, his tone still calm, yet carrying an undeniable force: "Mr. John, the foundation of business negotiations is a reasonable valuation and an assessment of future trends."

I admit that SITC has problems, otherwise Huifeng wouldn't have been dragged down by it, but its core values—the New York State banking license, hundreds of branches, existing customer inheritance, etc.—have not disappeared.

There's an old Chinese saying: Even a broken ship has three pounds of nails.

More importantly, if Hengsheng Group is truly determined to enter the US market, then Haifeng is a ready-made springboard; its strategic value cannot be measured solely by current financial data.

He paused, looked at John Reed, and continued, “I understand why you came to see me in person, Mr. John. The reason I’m sitting here talking to you is because I value our partnership with Citibank and believe that it is a wiser choice to concentrate resources in our advantageous regions.”

However, this doesn't mean Hengsheng would make a loss-making deal. If Citibank wants to eliminate a potential competitor and solidify its position in New York State, it should offer a more compelling proposal.

Lin Haoran's words were both soft and hard, highlighting the residual value and potential strategic significance of Haifeng, implying that Hengsheng might do it at any cost, while also emphasizing the potential benefits for Citibank, which could eliminate competition and shift the pressure back to the other party.

John Reed fell silent.

He realized that Lin Haoran was very familiar with the situation of Haifeng Bank and Citibank, and that his previous "hesitation" and "asking for advice" were probably more of a negotiation strategy.

This young Eastern tycoon was far more difficult to deal with than they had anticipated.

He took a deep breath, knowing that the original plan was no longer feasible.

He needs greater authorization to facilitate this deal. After all, acquiring Haifeng would indeed benefit Citigroup's layout in New York State and completely eliminate the possibility of Lin Haoran using it as a base to cultivate the United States.

At the same time, it also completely tied them to Lin Haoran, a Chinese business tycoon whom the entire Citibank regarded with great favor.

“Then, Mr. Lin, may I ask what your requirements are?” John Reed asked directly.

“My requirements are simple: Haifeng Bank can be sold to Citibank, or Citibank can acquire it with its equity. However, I need 8% of Citibank’s shares. Considering the price Huifeng Bank paid for Haifeng Bank, this 8% stake is not unreasonable,” Lin Haoran said with a smile.

However, upon hearing this, John Reed stood up immediately and said with some excitement, "Mr. Lin, this is impossible. 3% of the shares plus $1 million in cash is the greatest sincerity I can offer."

As for an 8% stake, that's impossible. Even if this deal falls through, we cannot agree to it.

Lin Haoran knew this was impossible, after all, Citibank's largest publicly disclosed shareholder only held 6.72% of the shares.

Previously, Citibank had given Lin Haoran a 3% stake, and now with an additional 3%, he has become Citibank's second-largest shareholder on the surface.

Therefore, even if Haifeng Bank's 51% stake is really worth 8% of Citibank's shares, Citibank's senior management would not allow Lin Haoran to increase his stake by another 8%.

Lin Haoran had already anticipated John Reed's excited reaction.

The financial groups behind these Citibank banks certainly don't want to be ridden on by a Chinese person.

He elegantly picked up his wine glass, gently swirling the red wine inside, his tone remaining composed:

“Mr. John, please calm down and sit down. I understand your concerns, but please let me finish what I have to say.”

John Reed took a deep breath, sat down again, but his eyes remained wary.

An 8% stake? That's an outrageous demand.

If we add the previous 3%, wouldn't the other party hold 11% of Citibank's shares and become Citibank's largest shareholder?

However, what John Reed didn't know was that the other party already held more than 8% of the shares, making them the largest shareholder of Citibank.

If they acquire another 3% of the shares this time, they will indeed hold more than 11% of Citibank's shares!

(End of this chapter)