How did Douglas Clague turn John D Hutchison into one of the largest trading houses in Hong Kong?
Establishment of John D Hutchison
John Duflon Hutchison (1855 – 1920) was born in Bromley, London, to an English father and a Swiss mother.
Hutchison relocated to Hong Kong from 1877. He joined Robert Walker & Co, a trading house engaged in selling general goods to China. He acquired the business in the 1880s, and renamed it John D Hutchison & Co.
Hutchison established an office in Shanghai, China from 1900.
Thomas Ernest Pearce (1883 – 1941) joined the firm from 1903.
John Colville Hutchison (1890 – 1965) declined to enter his father’s business, and instead joined the Foreign Office from 1915. He went on to become the first British ambassador to Communist China, and was later knighted.
T E Pearce acquired a controlling stake in John D Hutchison & Co in 1917.
Hutchison died in Shanghai in 1920.
Pearce was joined in partnership by his brother-in-law, Philip Stanley Cassidy (1889 – 1971), from 1922.
Pearce was killed in action during the Battle of Hong Kong in 1941. Cassidy became the chairman of the firm.
John Douglas “Duggie” Clague (1917 – 1981) was born in Bulawayo, Rhodesia (now Zimbabwe) and raised on the Isle of Man. He originally worked as a bank clerk. He was a convivial man, with a passion for horse racing.
Clague joined the British Army and was stationed in Hong Kong during the Second World War. Following the Japanese invasion he was captured and held in the Sham Shui Po prisoner of war camp. With three others, including John Pearce (1918 – 2017), the son of T E Pearce, he made a daring escape into China in 1942. He was awarded the Military Cross and a CBE in recognition of his bravery.
From Huizhou, Clague commanded the British Army Aid Group, a MI9 unit engaged in assisting POWs to flee Japanese internment camps. In 1945 he joined the Thailand underground movement, and when the war ended he took command of 30,000 Allied POWs in Thailand.
Clague was promoted to Colonel in 1945, and appointed War Crimes Liaison Officer for Burma and Thailand. Clague returned to Hong Kong in 1947 with a sterling reputation and an excellent network of acquaintances.
Presumably aided by an introduction from John Pearce, Clague was appointed deputy to Philip Cassidy. John D Hutchison & Co had suffered during the Second World War, and was dwarfed by the larger Hong Kong trading houses of Jardine Matheson and Wheelock Marden.
Clague develops John D Hutchison
Cassidy retired in 1952, and Clague was appointed chairman of John D Hutchison. He would go on to develop the company into a business with an international scope.
Clague bought out a 50 percent stake in J D Hutchison owned by Wheelock Marden in 1963. He renamed the company Hutchison International, and embarked upon the acquisition trail.
A S Watson, a pharmacy chain and one of the largest soft drinks manufacturers in Hong Kong, was acquired in 1965.
Other acquisitions included Davie Boag, a specialised trader, and Oriental Pacific Mills, a textiles business.
Hutchison gained control of Hong Kong & Whampoa Dock Company, one of the largest companies in Hong Kong, in 1969. Amidst the cultural revolution in China, and riots in Hong Kong, Clague found that assets could be acquired at a relative discount.
A colleague, John Richardson, later recalled, “[Clague] was an extraordinary man. He would buy a business over the fourth race at the Hong Kong races and someone would have to make sure the deal worked.”
Clague could claim that Hutchison was the largest trading house in Hong Kong by 1969.
Clague received a knighthood in 1971.
Clague was firmly embedded in the Hong Kong establishment. He held the prestigious role of chairman of the Royal Hong Kong Jockey Club from 1972 to 1974. The Financial Times described Clague as “one of Hong Kong’s most remarkable entrepreneurs” in 1974. He boasted, “I am Hong Kong’s Rock of Gibraltar”.
The downfall of Clague, and the rise of Li Ka-shing
A global recession in the mid-1970s hit Hong Kong’s export-driven economy hard. This, combined with heavy losses at an Indonesian subsidiary, high-risk financial speculations and overpayment of directors, led Hutchison to enter into cash-flow difficulties.
Hutchison was rescued from insolvency by the Hongkong and Shanghai Bank (HSBC), which acquired a one third stake in the company for £15 million in 1975. HSBC forced Clague to step down from executive responsibilities.
HSBC replaced Clague with William Wyllie (1932 – 2006), an Australian with a reputation as a turnaround specialist for Asian businesses. Wyllie regarded Hutchison as “a cowboy outfit”, and his initial reaction was that “there probably aren’t 50 subsidiaries that are worth a damn”. Wyllie reduced expenses, and divested 103 subsidiaries in 1976.
To the annoyance of Wyllie, HSBC sold its stake in Hutchison to Li Ka-shing (born 1928), a property developer, for less than half of its book value in 1979. Wyllie left Hutchison in 1981.
Clague died following a battle with cancer in 1981.
Ka-shing brought professional management principles to Hutchison, and expanded its operations into overseas markets. He appointed Simon Murray (born 1940), an affable Englishman, as managing director. Murray admitted, “I’m just the guy driving the truck. Li’s in the back, telling me which way to go”.
Ka-shing had extended his stake in Hutchison to 40 percent by 1991.
Murray and Ka-shing clashed over company direction: Murray wanted to invest in Britain and Canada, whilst Ka-shing wanted to concentrate on trade with mainland China. Murray was replaced as managing director by Canning Fok in 1993.
Ka-shing sold John D Hutchison Group, the trading arm, and Hutchison Boag Engineering, a building materials company, to Inchcape Pacific for US$111 million in 1990.
Hutchison remains one of the largest companies in Hong Kong, and Clague deserves credit for his faith in the Hong Kong economy and for establishing the strong foundations at Hutchison which Ka-shing subsequently built upon.