HONG KONG (Reuters) - Shares of Cheung Kong Holdings and Hutchison Whampoa surged on Monday after Asia's richest man Li Ka Shing announced a restructuring of his business empire, a move he said was aimed at creating better value for shareholders.
The group said on Friday that the Hong Kong conglomerate will split into two listed companies, one focusing on property and the other on telecoms, retail and energy, in a bid to boost their value and attract more investors.
Investors will now be able to choose from a cyclical property company or a globally diversified conglomerate, providing a more streamlined corporate structure that removes many cross-group investments.
The revamp will also see Li's companies shift their incorporation from Hong Kong to the Cayman Islands.
Cheung Kong shares jumped more than 20 per cent to HK$150.30 each, the highest since July 31, outpacing a 0.44 per cent rise in the benchmark Hang Seng Index. Hutchison Whampoa shares surged nearly 18 percent, the highest since September 11.
Some analysts said Li had timed the reorganisation to tap growing interest in Hong Kong shares from mainland Chinese investors, following a recent link-up that allows investors in Shanghai and Hong Kong to trade shares on each other's bourses.
Shareholders in Cheung Kong will swap their shares for a new vehicle registered in the Cayman Islands, which will absorb Cheung Kong's 50 percent holding of Hutchison Whampoa. The combined group will then spin off the property assets.
Relocating to the Cayman Islands gives both companies greater flexibility to distribute cash to shareholders.
As part of the reorganisation, Cheung Kong will ask Hutchison Whampoa shareholders to exchange each share for 0.684 CKH Holdings shares, resulting in the cancellation of Hutchison shares.
The 86-year-old Hong Kong tycoon Li built his sprawling empire over more than half a century from a plastic flower business, but has been frustrated that his group's listed companies trade at a discount to the book values of their net assets, a common feature of conglomerates.