The Tung family is increasing its grip on Orient Overseas Container Line through the purchase of a block of shares now held by a local firm with close ties to China.
The transaction, one of a number since the carrier reorganized in the late 1980s, will not affect operations.Treelane Co. Ltd., an investment vehicle owned by Henry Y.T. Fok, is selling 22.9 percent of its shares in Orient Overseas (International) Ltd. to Wharncliff Ltd., a company held by a Tung family trust.
The shipping line is an arm of Orient Overseas (International). It in turn is the principal operating unit of Orient Overseas (Holdings) Ltd., the ultimate corporate parent.
The price of the sale wasn't disclosed in the Monday announcement, but the deal will be done in installments.
It will leave Treelane with just 2.6 percent of the ordinary shares in Orient Overseas (International) and about US$68 million worth of redeemable preferred shares. The preferred shares have no voting rights but rank ahead of ordinary stock for dividends.
Voting control of the ordinary shares will be vested with Tung Holdings (Trustee) Inc., a company controlled by C.H. Tung, chairman of Orient Overseas (Holdings) and son of the line's founder.
Mr. Tung's trustee company also holds 66.9 percent of the ordinary shares of Orient Overseas (Holdings). A further 5.8 percent is beneficially held by Mr. Tung, his son and vice chairman, C.C. Tung, and Roger King, a director of the holding company.
Orient Overseas (Holdings) holds 74.6 percent of the ordinary shares of Orient Overseas (International).
The only other shareholder in that company is Island Navigation Corp. Holdings Inc. This Tung-owned firm, mainly engaged in ship management, holds
US$22.5 million worth of convertible redeemable stock through its Montfort Ltd. unit.
The effect of the transaction is to boost the Tung family's control of voting-class shares. It already has complete management control over day-to- day operations.
Orient Overseas has rebounded from the late 1980s, when it and many other shipping companies around the world hit financial shoals. At the time, the so- called public and private companies controlled by the family were interlinked.
The reorganization, approved by creditors that are owed a total of US$2.7 billion, separated those interests and created the current structure. It has been modified over the years and may be again in the future.
Mr. Fok's Treelane company was brought on board as a 35 percent shareholder of Orient Overseas (International), which was created in the initial reorganization. Mr. Fok was widely believed at the time to have been acting for Chinese interests when he put up US$100 million in the restructuring.
The Tung family has its own links with China dating back many years. It fled to Taiwan and later Hong Kong after the communists seized power in 1949.
In late 1989, Treelane, Orient Overseas (Holdings) and Island Navigation jointly sold seven tankers owned by an affiliate of the Orient Overseas group to the China Merchants group. It is the mainland's Hong Kong flagship, including China Merchants Steam Navigation Co.
As part of this deal, Treelane's stake in Orient Overseas (International) was reduced and it swapped some equity for the preference shares. As they have no voting rights, they amount to a loan.
Orient Overseas Container Line, the colony's largest operator, owns 33 vessels plying all the world's main routes. This month, it began a space- sharing arrangement across the Pacific with the American President Lines unit of American President Cos., of Oakland, Calif.
In the six months ended June 30, Orient Overseas (Holdings), the corporate parent, reported a loss after tax and before extraordinary items of US$6.8 million on revenue of US$590 million. That contrasts with a loss of US$946,000 a year earlier on revenue of US$713 million.