CY Leung has come under a cloud for his secret payouts on the DTZ takeover
Hong Kong Chief Executive CY Leung has been feeling the heat this week as details continue to emerge about his secret deal to receive $6.5 million as a “consultant” to Australia’s UGL on its 2011 acquisition of then-insolvent property agency DTZ.
The discomfort for the leader of Hong Kong must be all the more acute, however, considering he failed to extract another $4.8 million from the Australian engineering firm in return for agreeing not to compete with the property agency that he helped to build, once it had been sold to its new owners.
According to emails related to the deal, Leung was willing to block the acquisition of then-insolvent DTZ as compensation for losses he had suffered in attempting to build up DTZ’s Japan unprofitable Japan franchise prior to the takeover bid. Before his resignation from the company at the time of the acquisition, Leung had been the Asia-Pacific chairman of DTZ, and an executive director of the London-listed company.
A “My Way or the Highway” Negotiator
In an account in the Sydney Morning Herald, a party to the negotiations between DTZ and UGL commented on the negotiations with Leung by saying, “ It was like ‘here’s all my losing lottery tickets, could you buy them.”
In order to squeeze his payment out of UGL, Leung apparently relied on an aloof approach to negotiations, refusing to meet, speak or email with other parties and making his demands known only through terse communications from intermediaries that included summaries of earlier financial losses that he was demanding compensation for.
In his handling of the Hong Kong’s current political crisis, Leung has also taken a “less is more” approach; refusing to meet with demonstrators and announcing in his sole interview during the weeks old confrontation that demonstrators had “zero chance.”
Nine Percent Commission for a Failed Company
If UGL had acceded to all of Leung’s demands, the future leader of Hong Kong would have received a total of $11.3 million out of UGL’s $124 million takeover of the DTZ, essentially receiving a 9.1 percent commission for not blocking the acquisition of a bankrupt company.
Leung did not disclose the transaction to Hong Kong authorities, and received payment on the deal only after taking office as Hong Kong’s chief executive.
In the prepack sale of DTZ through an administrator, UGL was selected as the preferred bidder by DTZ’s board, of which Leung was a member. Reports have also emerged this week that in that sale, the board passed over an offer from a Tianjin-based company that would have amounted to $80 million more than UGL’s bid.
In the transaction DTZ’s existing shareholders, other than Leung, received no compensation for their equity in the company.
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