Hongkong Land to Relocate Base : Shift to Bermuda Seen Indicating Distrust of China

Hong Kong’s biggest landlord said Friday that it would restructure into a Bermuda-based holding company in a move seen by analysts as damaging to confidence in the British colony’s future.

The Hongkong Land Co., which owns most of the prime real estate in Hong Kong’s main business district, is following to Bermuda Jardine Matheson Holdings, the company made famous in James Clavell’s novel “Noble House.”

Jardine Matheson effectively controls Hongkong Land through a holding company.

“The only reason to do this is if you don’t trust China,” said a corporate lawyer who asked not to be named. “You can’t take bricks and mortar overseas but you want to be able to sell them and take the cash out.”

When Jardines moved its registration in 1984, commentators called it the “Bermuda Bombshell” because they said it showed a lack of confidence in China’s ability to preserve Hong Kong’s prosperity after it resumes sovereignty in 1997.

But Hongkong Land said it was not abandoning Hong Kong.

“The moves we have made today are hardly indicative of an intention to sell,” Chairman Nigel Rich told reporters. “We will always remain substantially invested in Hong Kong.”

Enduring Structure

He said the firm wanted to explore opportunities elsewhere and a Bermuda registration would give it more flexibility.

“Jardines wants to create an ownership structure that is more likely to endure after 1997,” said Laurence Amerine, research director of DMT Securities.

“When Jardines made their move, there was a school of thought that China would be less likely to try to take over an offshore company. No matter how the chairman is trying to dress it up, I think that’s the thinking behind Hongkong Land’s move,” he added.

“There is no special reason to move to Bermuda to expand overseas,” said Phillip Chan, research manager at Mansion House Securities. “I think it’s going to be taken negatively.”

Many analysts said the parent Jardine Group companies would benefit the most from the moves.

Hongkong Land also announced it will pay a 100th anniversary bonus to shareholders worth $654 million--one of the biggest payouts in Hong Kong history.

Jardine Strategic Holdings, a subsidiary of Jardine Matheson, will get 33% of that, enough to wipe out 56% of its debt.

“Jardine Strategic is the biggest winner,” said Nicholas Peacock, director of Hoare Govett Asia.