Swire Family Scion Offloads Stake in Swire Properties, Cuts Holdings of Swire Pacific

Merlin Bingham Swire, deputy chairman and chief executive of his family’s 208-year old conglomerate John Swire & Sons Ltd, has sold all of his shares in the group’s property development unit Swire Properties and has now cut his holdings in diversified subsidiary Swire Pacific by 66 percent so far this year, according to Hong Kong Stock Exchange disclosures.

In a series of transactions this week, the sixth generation descendant of the firm’s eponymous founder offloaded 1.15 million shares of Swire Properties and 301,000 shares of Swire Pacific’s class-A shares, while also paring his holdings of Swire Pacific’s class-B shares by 825,000 shares, with proceeds from the sales totaling HK$44.1 million ($5.7 million).

Swire divested the interests amid diverging share price performance between the two HKEX-listed firms, with Swire Pacific’s A and B shares having mostly recouped their post-pandemic losses, while Swire Properties’ stock is trading at all-time lows.

The 50-year old scion, who is a non-executive director of both Swire Pacific and Swire Properties, had served as chairman of both firms from July 2018 until he stepped down in August 2021 in favour of then Swire Properties CEO Guy Bradley. The executive is a shareholder of John Swire & Sons Ltd, the London-headquartered private holding company that controls the group’s portfolio of businesses in Hong Kong, mainland China, and other markets.

Separately, Swire Properties was removed from the MSCI Hong Kong Index on Monday, with the updated index set to come into effect as of the close of 30 August.

HK$1.5 Billion Share Buyback

Following the disposals, Swire no longer holds any shares of Swire Properties and Swire Pacific A, but retains 974,222 shares of Swire Pacific B.

Swire inherited the Swire Properties shares and a portion of his Swire Pacific A and B holdings in 2020 as executor of a will, according to stock exchange disclosures. The executive had also acquired shares of Swire Pacific A and B in a series of purchases in 2020 and 2021 before he began trimming his holdings in May.

A and B shares each carry one vote at general shareholder meetings, but one A share is nominally worth five B shares, with the more liquid A shares trading at a premium to B shares. According to Swire Pacific’s latest annual report, John Swire & Sons Ltd held 442.9 million A shares and 2.1 billion B shares as of 31 December, giving the Swire family 60.31 percent of the equity and 68.13 percent of the voting rights of the company.

Swire Pacific’s A and B shares are respectively trading 0.3 percent and 4.5 percent below their value a year ago, while shares of Swire Properties are down 23 percent over the same period. Those results compare to a 7.9 percent decline in the Hang Seng Index from a year ago.

Last week, the Board of Swire Properties approved a share buyback programme of up to HK$1.5 billion in a signal of confidence amid the developer’s underperforming stock price, with Swire offloading his shares just days after the announcement.

“We continuously maximise value for shareholders – crystallising value via our progressive dividend policy and further improving returns with our share buy-back programme,” a Swire Pacific spokesperson told Mingtiandi. “The share buy-back programme is a clear demonstration of our confidence in the business outlook.”

Swire joined the group in 1997 and has been a director of Swire Pacific and Swire Properties since 2009, as well as a director of Swire’s airline unit Cathay Pacific since 2010.

Swire Pacific is the Hong Kong-listed holding company for the group’s businesses in Hong Kong, mainland China, and other markets. The company’s portfolio includes an 82 percent stake in Swire Properties and a 45 percent stake in Cathay Pacific, as well as aviation services provider HAECO, beverage bottler and distributor Swire Coca Cola, and businesses spanning apparel and vehicle retailing and distribution, healthcare, and food and beverage.

Hong Kong Office Market Woes

Swire’s disposals came days after Swire Properties released its interim results for the first half of the year, with the developer’s net profit sliding 19 percent year-on-year to HK$1.8 billion, while its revenue of HK$7.3 billion was flat compared to the same period last year.

Recurring underlying profit declined 8 percent to HK$3.6 billion over the period, which reflected a 6 percent drop in property investment underlying profit, as well as small losses in the property trading and hotels segments.

The developer’s revenue was hit by a decline in office rental income in Hong Kong amid weak leasing demand and oversupply. Swire Properties reported 97 percent occupancy at Pacific Place in Hong Kong’s Admiralty area at the end of June, easing from 98 percent at the end of last year, while rents at the flagship office complex tumbled 16 percent for the six-month period.

“The interim result was impacted by a subdued office market in Hong Kong where we are seeing weak demand coupled with a continuous supply of new space coming onstream,” Swire Properties’ CEO Tim Blackburn said in the earnings announcement. “The recovery of the Hong Kong office market has proven slower than expected in the wake of the pandemic. The market is likely to remain subdued for the rest of 2024, and rental levels will remain under pressure.”

Office vacancy in the Asian financial centre reached a record high of 13.6 percent at the end of June, while average rents have plunged 36.5 percent from their 2019 peak, according to a July report by JLL.

Swire also disclosed that it has committed over 60 percent of the capital for a HK$100 billion investment plan it announced in 2022, with the cash going into new and ongoing projects in the company’s key markets. The ten year plan has a target allocation of HK$50 billion for existing and new commercial developments in mainland China, HK$30 billion for expanding the company’s Taikoo Place and Pacific Place complexes in Hong Kong, and HK$20 billion for residential trading projects in Hong Kong, mainland China, and Southeast Asia.

In June, Swire and a vehicle of China Life Insurance agreed to acquire cash-strapped mainland developer Sino-Ocean’s entire 64.79 percent stake in the Indigo Phase II commercial project in Beijing for RMB 4 billion.