A tough choice for the colony company

TOM STEVENSON

City Editor

Hongkong Land's decision to accept Kvaerner's offer for its 26 per cent stake in Trafalgar House was not taken lightly. Involving a pounds 100m loss, the disposal represents the latest in a long line of strategic failures by its ultimate parent, Jardine Matheson, which has been trying to diversify out of the colony for 25 years.

Henry Keswick, Jardine's chairman, is renowned for his virulent hatred of what he himself once described as China's "Marxist-Leninist, thuggish, oppressive" regime. But his dislike of what Hong Kong has in store from next July is matched only by his inability since the early 1970s to reduce the family company's dependence on the colony.

The swoop on Trafalgar's shares in October 1992 was an audacious move to take advantage of a dramatic plunge in the value of one of Britain's once-greatest conglomerates. The Keswicks hoped it would be a cheap toehold in a British-based but international construction and engineering group. It had the added bonus of some high-profile trophy assets such as London's Ritz hotel and the QE2 cruise liner.

The decline of Trafalgar in recent years was a shocking slap in the face for that strategy but it was not the Keswicks' first taste of failure. In the late 1980s Jardine acquired Kwik Save, the UK discount grocer that has since underperformed the market by a wide margin. It has also made poor investments in Spain. By 1994, more than half of group profits still came from Hong Kong.

Ironically evidence of a rapprochement with the Chinese authorities might mean the imperative to shift assets out of the colony has lessened.