Third generation moving up at New World Development
Can the Cheng family behind New World Development, a conglomerate with interests in property, hotels, infrastructure and department stores, prove the Chinese proverb wrong and make its wealth last three generations?
The Hong Kong-listed firm’s board of directors currently includes two grandchildren of founder Cheng Yu-tung: 34-year-old Adrian Cheng Chi-kong, executive director and joint general manager of the company, and his 33-year-old sister, executive director Sonia Cheng Chi-man. Their father is New World Development chairman Henry Cheng Kar-shun, Cheng Yu-tung’s eldest son.
From April 1, Adrian Cheng will be promoted to executive vice-chairman, New World Development announced. This move is seen as an indication he will eventually take over the family business from his father.
This year, I expect Adrian Cheng to put in some new management philosophy and workflow
A younger brother, 31-year-old Brian Cheng Chi-ming, is an executive director of NWS Holdings, the Hong Kong-listed infrastructure subsidiary of New World Development. Henry Cheng is also chairman of NWS.
Patriarch Cheng Yu-tung, now nearly 90, founded New World Development in 1970 and retired as its chairman on March 1, 2012. Adrian Cheng, who had been an executive director since 2007, was appointed joint general manager of the company, while Sonia Cheng was appointed executive director and Henry Cheng succeeded his father as chairman.
In a report released that day, JP Morgan said: “We maintain our positive view on New World Development, post the announcement of a change in the board of directors and 2012 interim results. The retirement of Cheng Yu-tung signals that the founder is comfortable to fully hand over the leadership to the next generation. The announcement of Cheng Yu-tung stepping down as chairman and executive director is an indication of the company entering a new phase of operations. The new management team is expected to introduce Western-style management techniques.”
Bocom International analyst Alfred Lau said Adrian Cheng had introduced new management approaches and workflow at New World Development.
“Adrian is very hands-on in the business,” Lau said. “The feedback from his colleagues is he is very proactive, very energetic and he consults a lot with his management. He has put in new IT systems. I see this as positive. This year, I expect Adrian Cheng to put in some new management philosophy and workflow.”
The Western style of the new management team reflects the Western education and work experience of Adrian and Sonia Cheng. Adrian Cheng graduated from Harvard University with a Bachelor of Arts degree cum laude (with honours), while Sonia Cheng graduated from Harvard University with a major in applied mathematics.
Before joining the family firm, Sonia Cheng worked “in a major international investment bank and a global US private equity firm specialising in real estate investments”, while Adrian Cheng worked in “a major international bank”, according to New World Development’s 2014 annual report.
The siblings’ work and study experience are a far cry from that of their grandfather Cheng Yu-tung, who at the age of 13 was sent by his father from Shunde in Guangdong to work as an apprentice in a jewellery shop called Chow Tai Fook in Macau, which was owned by a friend, Chow Chi-yan. Cheng Yu-tung married Chow’s daughter, and Chow Tai Fook has since grown from a humble jewellery shop to Chow Tai Fook Enterprises, which controls New World Development. New World Development now has a market capitalisation of HK$81.6 billion, of which 43 per cent is owned by the Cheng family.
Since Cheng Yu-tung’s son and grandchildren took over his company, New World Development has been trying to shed the trappings of a traditional Chinese family conglomerate. On December 20, 2013, it signed an agreement to sell its 23.6 per cent stake in CSL, a Hong Kong mobile telecommunications operator, for US$572 million. The deal was completed in last year.
A JP Morgan report issued that day said New World Development had refocused.
“NWD has transformed itself to be a focused property company over the last few years,” it said. “The company’s holdings in different businesses have either been spun off or disposed of. The disposal of the telecoms operation will further reinforce the market confidence of the company moving away from the conglomerate structure.”
But not all the company’s spinoffs were successful. In March last year, New World Development proposed privatising its mainland property arm, New World China Land, for up to HK$18.6 billion, but shareholders voted the proposal down in June. New World Development also wanted to spin off and list its hotel business, but has so far not managed to do so.
New World Development’s hotel business operates as the Rosewood Hotel Group, of which Sonia Cheng is chief executive. Besides Hong Kong, Rosewood manages hotels in the United States and France, including the Hotel de Crillon in Paris which will reopen later this year. The Hotel de Crillon is known for its debutante balls, which have been attended by the granddaughters of retired senior Chinese officials, including Wan Baobao, granddaughter of former vice-premier Wan Li, and Chen Xiaodan, granddaughter of Chen Yun, a former Communist Party vice-chairman.
