How did Douglas Clague transform 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, the son of an English father and a Swiss mother.
Hutchison relocated to Hong Kong in 1877. He joined Robert Walker & Co, a trading house engaged in selling consumer goods to China. He acquired Robert Walker & Co 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 from John Duflon Hutchison 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. After Pearce was killed in action during the Battle of Hong Kong in 1941, Cassidy became the chairman of the firm.
Douglas Clague
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. In recognition of his bravery he was awarded the Military Cross and a CBE.
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.
Wheelock Marden acquired a half share in John D Hutchison & Co in 1948.
Clague develops John D Hutchison
Douglas Clague was appointed chairman of John D Hutchison following the retirement of Philip Cassidy in 1952.
Clague bought out the Wheelock Marden stake for £1.5 million in 1963. He renamed the company Hutchison International, and embarked upon the acquisition trail.
Control of A S Watson, a pharmacy chain and one of the largest soft drinks manufacturers in Hong Kong, was acquired in 1963.
Other acquisitions included Davie Boag, a trading company, and Oriental Pacific Mills, a textiles business, in 1967.
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.”
Hutchison International gained majority control of Hong Kong & Whampoa Dock Company, one of the largest companies in Hong Kong, in 1969. Clague claimed that Hutchison International was now the largest trading house in Hong Kong.
China Provident, a warehousing business with valuable property assets, was acquired in 1970.
Clague became firmly embedded in the Hong Kong establishment. He received a knighthood in 1971. 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”.
HSBC rescues the business
A global recession in the mid-1970s was to have a severe impact on Hong Kong’s export-driven economy. 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. Clague sold a 22 percent stake in Hutchison International to the Hongkong and Shanghai Bank (HSBC) for £15 million in 1975.
With effective control of Hutchison, HSBC forced Clague to step down from executive responsibilities. He was replaced by 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 expenditure, and divested 103 loss-making subsidiaries in 1976.
Clague argued, “that Hutchison had liquidity problems is without doubt. But the seriousness of them was grossly exaggerated, and talk of possible insolvency can only be regarded as irresponsible, if not mischievous”.
Hutchison International underwent a full merger with Hong Kong & Whampoa Dock to form Hutchison Whampoa in 1977.
HSBC sold its stake in Hutchison Whampoa to Li Ka-shing (born 1928), a property developer, for £52 million in 1979. Wyllie complained that the stake was sold for less than half of its book value, commenting, “Hutchison was sold far too cheaply. It was a steal.” Wyllie left Hutchison Whampoa in 1981.
Clague died following a battle with cancer in 1981.
Hutchison grows under Li Ka-shing
Ka-shing had extended his stake in Hutchison to 40 percent by 1981.
Ka-shing 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 brought professional management principles to Hutchison, and expanded its operations into overseas markets. He developed a management structure that he explained combined “the fluidity of Chinese philosophical thinking with the science of Western management”.
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.
By the early 1990s the diverse conglomerate had been streamlined into five industries: telecommunications, ports, consumer retail and manufacturing, utilities and property development and management.
Murray and Ka-shing eventually clashed over company strategy: 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 (born 1951) in 1993.
A stake in Orange, the telecommunications business, was sold for $15 billion in 1999.
Kruidvat, a health and beauty retailer with 1,800 stores, including 700 Superdrug outlets across Britain, was acquired for £829 million in 2002.
Cheung Kong Holdings, controlled by Ka-shing, acquired full control of Hutchison Whampoa for US$24 billion in 2015, to form CK Hutchison Holdings. CK Hutchison had a market capitalization of £19.8 billion in 2023.