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SCMP Reporter

SAN Francisco-based investment firm Hellman and Friedman has become the first US company to invest in Hong Kong International Terminals (HIT).

  The firm, which is also a prominent shareholder in US shipping company American President Lines (APL), has acquired a 2.5 per cent strategic stake in HIT, of which Hutchison Whampoa holds 77.5 per cent.

  The transaction is estimated to have a price tag of about $470 million.

  ''We are extremely delighted to have Hellman and Friedman among our shareholders,'' HIT managing director John Meredith said.

  ''We welcome them to the group very much. Their coming on board will enhance the prestige of HIT,'' he added.

  Hellman and Friedman's move has sparked speculation that APL, the biggest customer of HIT, would be among the first shipping lines to call at Yantian in southern China when it opens for business in July.

  A consortium led by HIT has taken a 70 per cent stake in Yantian International Container Terminals, which is responsible for developing and managing the port.

  Orient Overseas Container Line (OOCL), which provides a joint service with APL on the transpacific trade, has endorsed the Yantian port.

  Hellman and Friedman's buying into HIT has given the company a more international mix of Hong Kong, mainland, Japanese and US companies as shareholders.

  The other shareholders include China Resources (10 per cent), Hongkong Bank (five per cent), Mitsui OSK Lines (four per cent) and Mitsui and Co (one per cent).

  It is expected that Mick Hellman, managing director of the company's Hong Kong affiliate, Hellman and Friedman Asia, will join the HIT board.

  If that happens, he will fill the position vacated by OOCL parent Orient Overseas (International) Ltd (OOIL), which sold its 7.5 per cent stake in HIT last year.

  Mr Hellman's father, Warren Hellman, a former Lehman Brothers president, and Tully Friedman, former managing director of Saloman Brothers, formed Hellman and Friedman in 1984 after becoming disillusioned with Wall Street's fee-driven culture.

  Mr Hellmen refused to comment on the transaction yesterday, but it is understood to be the first deal Hellman and Friedman Asia has closed since it was set up in October 1992.

  Hellman and Friedman's stake is considered strategic because the company believes in long-term investments, five years or more, and does not involve itself in real estate deals, or high technology.

  It is rumoured that the recent restructuring at HIT was done at Hellman and Friedman's request before it agreed to take a stake in the company.

  Analysts said that would suggest that HIT is ripe for spinning off from the Hutchison group for a separate listing, to raise money for the group's expansion in China.

  In 1984, Hellman and Friedman gained instant national attention in the US by recommending a US$1.7 billion leveraged buyout of then publicly listed jeans maker Levi Strauss and Co, organising what was then the biggest privatisation of a company.

  Hellman and Friedman is best known in Asia as a member of the Tourang consortium which won the bidding battle for control of publishing group John Fairfax Holdings and subsequently floated an interest to Australian investors.

  Former Jardines taipan Brian Powers was lured to head the local operation of Hellman and Friedman.

  The US company has been given more than US$1 billion by US investors to invest around the world.

  Mr Powers played a key role in restructuring Jardine Matheson between 1986 and 1988.

  He was appointed chief executive of Jardines in early 1988 but resigned later in the year.

  In February last year, Mr Powers was appointed managing director of Consolidated Press Holdings, controlled by media tycoon Kerry Packer.

  Apart from its advisory business for a small circle of clients, the US company manages two investment partnerships with contributions from a range of US pension funds, companies and individuals.

  The firm has made a strategic decision to make its overseas investments in the Pacific region rather than eastern Europe, where many of its US competitors have focused their attention.

  Mr Hellman senior has said that his main interest in the region is in Indonesia where the company is also considering establishing an office.

    ''It is almost hopeless for us to try to do something in China,'' he told the Australian Financial Review last year.

  ''If we sent our vast organisation of perhaps three people running around China looking for investments, they would never be seen again and we would make no impact,'' he said.

  ''But Indonesia is far more comprehensible than China and a far better use of our time and resources. It is very efficient to get to those 15 or 20 families that are all very important in industry,'' he said.



Share deal links HIT with US shipping giant