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March 10, 2014 6:51 pm
Jardines, the storied conglomerate that helped found British Hong Kong, is seeking to ditch its premium London listings, making it the first company to downgrade its status to avoid new rules aimed at curbing the influence of controlling shareholders.
The company has asked shareholders in five companies – Jardine Matheson, Jardine Strategic, Hong Kong Land, Dairy Farm International and Mandarin Oriental – to vote next month to approve a downgrade of its listing to “standard”.
The move comes as Seplat, a Nigerian oil company, announced it would seek only a standard listing when it floats in London and is likely to reignite the debate over whether London is losing its reputation for high standards following a string of corporate governance scandals at natural resources companies.
A regulatory overhaul announced in November was an attempt to address the issues at groups such as ENRC and Bumi, where institutional investors have found their influence squeezed by tiny free floats and large controlling stakes held by oligarchs.
If shareholders approve the downgrade, it would make Jardines the biggest company after Russian oil group Rosneft to maintain a primary listing in London without meeting the UK’s more stringent premium standards on corporate governance.
Since its formation in Canton in 1832, the company has been run by the Jardine family and its descendants, and has a high profile past that included a role in the 19th century Opium Wars and a hostile takeover attempt by Li Ka-shing in the 1980s and 1990s. However, the group, which is currently controlled by the Keswick family, has attracted less attention since moving its secondary listing from its Hong Kong home to Singapore 20 years ago.
It is the biggest landlord in Hong Kong’s most prestigious business district and controls Astra, Indonesia’s biggest listed company. It is also the second-largest health and beauty retailer in much of Asia and it runs the Mandarin Oriental hotel group
Both Jardines and Seplat, which will also announce plans to list in Lagos, will have to comply only with basic EU rules for minimum free float and shareholder rights.
So far, Jardines is the only company that has approached the Financial Conduct Authority asking to shift to the standard listing since the rule changes were proposed, according to one source close to the listing rulemaker. Some companies have switched for other reasons in the past.
Under reforms put forward by the FCA late last year, majority shareholders in premium listed corporations will have to keep an “arm’s length” distance from the company and not interfere with day-to-day control. A final version of the rules is due this summer.
Jardines is run as a closely connected web in spite of its separate listings. Jardine Matheson and Jardine Strategic hold majority stakes in each other while each, or both, control the other companies.
London has railed against the raft of recent regulations from the EU and the UK government as it fights to maintain its reputation as a global financial hub
Some shareholders were surprised by the decision. Most have long accepted Jardines’ refusal to comply with governance norms – it does not have independent directors, for example – and had not expected the UK changes to lead to much more than extra disclosure.
“It’s unfortunate. Here’s a company that for years has not ticked the boxes in terms of corporate governance, and we’ve all said ‘fair enough’ given their treatment of minorities. Now they are asking to remove the boxes altogether,’” said one investor.
“Shareholders are essentially being asked to trust not just that this generation will be good managers, but that all future ones will be too. I’m not sure we can support this,” he added.
A spokesman for the Jardines group said the company believed shareholders were comfortable with the move.
“They recognise we are maintaining our governance arrangements we’ve had in place for many years which have proved successful in creating shareholder value,” he added.
The group has grown rapidly in the past decade. Profits at Jardine Matheson have grown by one-third per year over that time to $1.6bn in 2013, while shares have produced a total return of 23 per cent a year.
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