View from City Road: Jardine's regulatory arbitrage grates

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The Independent Online
It was not just the Chinese in Hong Kong who were exasperated yesterday with the Keswick family and its attitude. The whole banking and business community appeared irritated by their perpetual demands for special treatment from the authorities for the Jardine empire, and refused to accept the explanation that the latest row is all about regulatory tidiness.

Jardine moved its domicile to Bermuda 10 years ago to be free of what it saw as a Chinese threat. It moved its main listing to London three years ago to reinforce this. Ever since, it has been demanding to be regulated by the Bermuda takeover code alone.

This code, based on the London takeover code, has stricter disclosure rules than in Hong Kong, giving early warning of stake-building ahead of bids. It also has a 30 per cent shareholding threshold, above which a full bid must be mounted, rather than Hong Kong's 35 per cent, and restricts owners of stakes above 30 per cent to buying no more than 1 per cent a year. The Hong Kong rules allow creeping takeovers by purchases of 5 per cent a year.

With such complex cross-holdings, an assault on one part of the of the Jardine empire could easily lead to control of other parts. Thank you, and goodbye, is Jardine's response to Hong Kong.

Jardine is playing 'regulatory arbitrage', which means shopping around for regulators who suit you best. Hong Kong has creditably refused to play ball. It is a shame that the London Stock Exchange's listing rules do not allow it to intervene to help to stop this dangerous game, which is putting Jardine within an untried legal framework on the other side of the world to the main market in which its shares are traded.

There is only one sanction for Jardine shareholders, which is to sell. Not only have the Keswicks, Simon and Henry, who lead the last of the hongs, displayed a damaging obsession with the Chinese, they have also misjudged the market. They have very publicly continued their withdrawal from Hong Kong and upset the Chinese at a time when most of the Western world has re-rated China as a country of enormous growth potential. Everyone else is queuing up to get in, just as Jardine is queering its own pitch by treading on Chinese toes.