Message in a bottle

Last Saturday, Financial Times ran a hugely entertaining article called “Message in a bottle.” (The website requires registration! 🙁 ) The author is Tim Clissold.

As professor Rudolf Wagner puts it: it is an “exceedingly interesting extensive insider article on the establishment, quandaries, and eventual demise of a joint venture with a Peking beer brewer. ”


(From “Message in a bottle” )

In the early 1990s, accountant Tim Clissold was on the brink of becoming very rich. He and his partners had raised $400m and their company, Asimco, was riding high on China’s foreign invsstment boom .Everything was done by the book: he learned Mandarin, they always bought controlling stakes and assiduously courted their hosts even if it meant downing the odd deer’s penis at official banquets. What they hadn’t counted on was China: when a factory manager absconded with $5m, an anti-corruption official said he would investigate only if he was given “a car and some working capital”. Meanwhile, the company’s millions drained away, leaving a trail of furious investors. But all was not lost: in 1995 they bought a string of Beijing breweries. This is Clissold’s story of what happened next。

…… the ultimate prize for a foreign investor in this booming market was Five Star, the country’s biggest beer brand. It appeared hopelessly out of reach for us but, after months of convoluted negotiations, we beat 14 other suitors, including many famous names. Amid great celebrations in the spring of 1995, Asimco bought into three Five Star breweries plus a smaller rival brewery, Three Ring. My partner Pat and I were suddenly in the beer business.

Pat was a larger-than-life Wall Street banker, the son of a steelworker, who had reached the top. He even came packaged up with the pink silk ties, blue pinstripes, an ear-splitting laugh and an insatiable appetite for oysters, champagne and Cuban cigars. He’d sit around after dinner, in clouds of smoke, with wine glasses strewn around the table, bantering and howling with laughter and all the time fiddling with the enormous red rubies on his gold cufflinks. I met him after he came to China, convinced that, like the US in the late 1800s, it was poised for massive expansion. “But this time,” he used to say, “it’ll be bigger ‘n’ quicker.”

From Wall Street, it looked as if America and China were the only two countries in the world big enough to support companies with just their domestic markets. And China, just like late-1800s America, was about to see its industries consolidate. It was the last market on earth with such incredible potential, and what it needed was capital. Lots of it – and that’s where we came in.

A few weeks after we made the brewery investment, just as the sounds of celebration started to die away, I received a note from the Five Star factory director, a Mr Xu. It was difficult for me to make out his badly written Chinese characters but he seemed to be asking for “understanding that he had made some urgent payments while Chairman Pat was out of the country”. I didn’t take much notice at first, but when I asked someone to get me a cash balance from the joint venture, I was told that there were only a few million left in the accounts. It couldn’t be true. We had wired more than $60m into the account two weeks earlier, so I asked again. Sure enough, there was now only a few million left. About $58m had been transferred out over the previous three days. I was speechless. How could that have happened? The signature cards lodged at the bank required signatures from our side before payments could be made. As I tried to understand what had happened, Pat called in from the US.

After I explained that $58m appeared to be missing, there was a long pause and then: “We gotta find that fucking money or it’ll be time-out from the investors!”
…………

Please click here to read the whole article.

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