Li

By Michael Schuman

HONG KONG Li CHEUNG KONG HOLDINGS/HUTCHISON WHAMPOA Asia's richest man, Li Ka-shing, is preparing to pass on the keys to his empire. Which son will he choose--the steady, cerebral firstborn or the flashy, creative younger son? 2002 Revenues: $20.5 billion

Wealth will not pass beyond three generations," warns a Chinese proverb. Genes, the thinking goes, don't always carry the entrepreneurial DNA of an empire's founder to his descendants, who consistently dissipate the ancestral fortune. That quaint admonition must be weighing on the mind of Hong Kong--based alpha tycoon Li Ka-shing. Though he has given no indication that he is contemplating retirement, Asia's richest man (estimated net worth: $12.4 billion) is 75 years old. Which of his two sons--quiet, nose-to-the-grindstone Victor or sociable, creative Richard--will take over the family businesses? The Li holdings are massive and include property giant Cheung Kong Holdings, one of Hong Kong's biggest property developers, and the ports, retailing and telecom conglomerate Hutchison Whampoa. It's a question that Li, as well as investors in his publicly traded companies, which have a combined market value of $74 billion, must inevitably confront in the coming years as he attempts to safeguard his immense legacy.

Succession is always a thorny topic, but Li's case is sensitive because of his reputation as a dealmaker whose instincts may be impossible to duplicate. Li is also considered one of Asia's most forward-thinking businessmen. Hutchison Whampoa was an early investor in cell-phone companies such as Voice Stream and Orange, which were sold for huge profits. The company operates mobile-phone networks in Europe, Asia and Australia, though analysts are questioning Li's unprofitable investments in next-generation, or 3G, mobile-phone networks. It has major retail holdings in Europe (Superdrug) and Hong Kong, and also owns ports in the Americas, including those at each end of the Panama Canal.

Unlike many Asian tycoons, Li relies on nonfamily professionals to run his empire. That said, analysts don't expect him to choose a successor outside the bloodline. The betting is that Li will pass his scepter to eldest son Victor, 39, a Stanford-trained engineer and deputy chairman of Cheung Kong.

The choice would certainly be in keeping with Chinese tradition. Victor has been the classic filial understudy. He lives with his wife and daughters in the same house as his father. In a rare interview, Victor declined questions about succession but stressed how much he is like his legendary dad: "We're good partners working together ... When we reach decisions, we almost always arrive at similar conclusions." Victor adds that he has taken on many of the day-to-day business operations. At company headquarters in downtown Hong Kong, Victor says, he toils away with middle managers in his ninth-floor office, which he calls "the engine room," while Dad plots big-picture strategy from the palatial 70th floor.

Still, little is known about the heir apparent. "There hasn't been a huge amount of visibility into ... what he's doing," notes Steven Li, an analyst at J.P. Morgan. The biggest worry is that Victor might lack his father's flair for sniffing out deals. Li is called Superman in Hong Kong. Victor is called "enigmatic" and "nondescript" by analysts. Lately, though, he seems to be coming out of his shell. In November, Victor, a Canadian citizen, won control of Air Canada with a $500 million bid--his first major foray outside the family businesses. Unions, however, resisted Victor's push to overhaul the airline's pension plan, so he pulled back. That's the kind of reasoned decision making that could earn him his CEO wings.

Victor's brother Richard, 37, went his own way 14 years ago. He lives in a town house near Hong Kong's Victoria Peak, a superwealthy enclave, zips around Victoria Harbour in two 60-ft. yachts and has kept tabloids busy with his amorous liaisons. In 2001 Richard was embarrassed when his telecom, Pacific Century CyberWorks (PCCW), was forced to admit he had never graduated from Stanford, as the firm's website claimed.

What Victor might lack--entrepreneurial sass--Richard has in spades. Richard founded Asian satellite broadcaster Star TV in 1990, selling it three years later to News Corp. for a $725 million profit. But his initiatives have been a source of trouble too. In 2000 Richard deftly used PCCW's inflated stock to buy Hong Kong's dominant phone company for $28 billion. But his vision of transforming the staid blue chip into the world's largest broadband Internet business went kaput with the tech bubble. After toppling 97% from its peak, PCCW's stock recovered, but Richard's reputation lay in tatters. Indeed, the hit Cantonese movie Golden Chicken featured an embittered prostitute watching Richard's stumbling explanation on TV and yelling "Shut up before you can remember what you want to say! I've lost everything on your stock!" Though Richard remains chairman of PCCW, last July he turned over the top job to the former CEO of Hong Kong's subway system. But the PCCW saga hasn't dulled Richard's love of deals. Last year he partnered with investment fund Ripplewood in its takeover of Japan Telecom. And PCCW, its debt reduced by two-thirds since 2000, intends to expand again, with plans to launch wireless broadband services in Britain by midyear.

Both sons still have time for practice at empire building. Li insists he will not retire anytime soon. "I am busy at work, as always," he said last year. With shares in Hutchison and Cheung Kong climbing sharply in recent months, investors won't mind if the two boys wait in the wings a while longer and observe the ways of the grand master of Asian business. --By Michael Schuman. With reporting by Kate Drake/Hong Kong

With reporting by Kate Drake/Hong Kong