HONGKONG TELEPHONES.
AGREEMENT REACHED AT LAST.
FULL STATEMENT OF NEGOTIATIONS. TELEPHONES TO BE TAKEN OVER BY LOCAL COMPANY.
THE HONGKONG TELEGRAPH,
MONDAY, MARCH
1925.
alderation shown by Schedule No.¡ of the present undertaking con- tive. It would be a mattery, The second remark which 1 with Mt. Taggart's Reply.
med to make is that, in fairnses to my from 5, from $1,481,856 to $1,407,591. ditional, inter alio, upon a satin-some gratification to It will be observed
our disenona colleague, Mr. Parker Ness, it must In view of the fit that the factory understanding being reach-sonally to see paragraphs 2 and 3 of Bir Georgul
with the authorities on result in a settlement likely rebe remembered that in the year. Gibb's statement that he was then figure to which you are now pro-ed
to agree
is $1,488,280 the questions of the basis upon dound to the credit of all parties before his visit to Hongkong the of pared willing to reduce the Agure
the which the new Company would be and I know that you yourself Company had in fact only earned $1,536,172 to $1,489,284 (by haly-(should read $1,488,284),
Therefore, would be none the loan delighted a nett credit balance of £2,251, on ing the figure of $103,770 which apparent difference between us is permitted to operate.
to $15,003. the actual formation of the local at so happy a result. he originally claimed as an addi-therefore reduced tion to the proposed purchaso con- Consequently, I am of the opinion, Company is necessarily subject sideration of $1,431,306), but that and I trust that you will agree, to this contingency. the profits for 1924 wore to be that our negotiations have now retained by the present company; reached a stage at which the out- whereas, according to Mr. Tagatanding difficulties should not
The Purchase of Bhares.
In conclusion, I desire to avail revenue account, and were unable to pay any dividend. This was myself of this opportunity of due to the combined effect of the thanking you for the spirit of courtesy that has, throughout our heavy increase in working ex- Then again, paragraph No. negotiations, characterised the pre-out the world, and the deprecin- ponses, a common feature through- gart's basla aay suma withdrawn prove a serious obstacle to a final refers to a price to be paid for thosentation of your case and for the ton of Sterling, in which currency
whole of the shares in the existing tolerance you have evinced In all by the Company in order to pay and harmonious settlement.
At this juncture I deem it oppor-each).
Company (89,761 shares of £1 our conversations by so patiently the Company's charges have, for fa dividend, to pay income tax, or
I must again emphasize listening to the various angles of some years, been collected.
I wish. in conclusion, to cordially With the advent of Sir George locally formed company, and for for any other purpose would (by tune definitely to make it can that it is not the Intention of those argument I have deemed it neces 5. Gibb (the Chairman of the approved rates which would pro-reason of Assets then belas re- you that further concession on Interested in the formation of a sary to place before you, in which reciprocate the courteous and piep- of the part of those for whom I act Hongkong Company to purchase relation I wish to assure you that sant acknowledgments and good China & Japan Telephone & Elec-vide a reasonable minimum reduced) result in a reduction Irfe Company Ltd., and of its turn to the shareholders), that the purchase consideration-repre- cannot in the circumstances now shares in the existing Company: should our united efforts result in withes which are expressed in
Particulars of the Terms.
the meeting should approve that seated by $1,481,396, the purchase consideration to bel
paront company, the Oriental Tele. phone Company Ltd.) the negotin- tions for the acquisition of the telephone undertaking in Hong kong by a Company to be formed locally for that purpose (whichments he unfortunately proved
overcome
the
the
I venture to one.
which I
renson
Company
Все
that a
ouri
with
we have
(Sgd.) GEORGE S, GIDE J. H. Taggart, ́Esq.
Application to Government.
Mr. Taggart prepared schedulesary addressed the following letter/out the manner in which I had I submit that your Company has feussed in an earlier part of the land so fully to my letter of the throughout the negotiations) and
to explain the manner in which to Mr. Taggart :-
he had arrived at a figure for the acquisition of the undertaking an
$3
The Terms.
Hongkong, January 30, 1926.
signed) GEORGE S. Gm1.
J. H. TAGGARt, Esq. Ilangkong. January 30, 1925,
ns...
during the six months from January 1, 1925, to June 30, 1925 Land and Buildings (as mentioned on page 3 of the letter)
we
reasonably be expected. More-
the figure I recommend as the pur-bringing matters to a successful your letter. We have, during The following is a copy of Mr. over, I feel confident that if you chase consideration represents issue, and you enter into the new these few weeks, had some hard will view in relrespect the pro-the consideration in dollars company on the lines I have had tussles in our efforts on behalf of paid to the existing company by the Taggart'e reply:
Hongkong, February 2, 1925. tracted negotiations dating from ($1,400,000 of which will be satis-the honour to submit to you, then the interests which we wore each Hongkong company proposed to
the visits of Mr. Parker Ness (anded by the lance of sharon in the you need have no hesitation in bound to safeguard, but in our be formed be based upon the state-Sir George S. Gibb, Kt.,
the whole negotiations there has never been had prepared (and Chairman of the
the lengthy and involved reports, now, Company) for the taking over placing reliance on China & Japan Tel. &
discussions and correspondence of the business as a going concern. hearted co-operation of my cola single haat word spoken which abortive which had already generally been
Electric Co., Ltd.,
consequent thereon) to the presente propose to purchase the inter leagues and myself in leaving no need cause regret to either of us. when conducted with Sir George approved na being fair and ren- whereas Sir George
Hongkong.
time, you will undoubtedly arrive taking, not shares in the Company. stone unturned with a view to the And I believe that we really have Gibb's predecessor, Mr. Parkersonable),
Dear Sir George,—Replying to at the conclusion that your Com-
Turning to paragraph 5, this promotion of the welfare of the succeeded in reaching a fair and News, when he visited the Colony Glbb on behalf of the Telephone three years ago) were revived in Company was not prepared to ae your letter of the January 30 many cannot now so detrimentally
am likewise precluded to the public and all others.con-we have both frankly realised that January, and we have been ancept $1,431,396 as a basis, but 1925, covering a statement setting nffect its own Interests as to de-raises a further question upon now Company on lines beneficial just conclusion, mainly because horised to state that a settlement was willing to agree to 31,585,172 forth the terms upon which you cline a settlement tendered on arom binding the new Company, cerned.I am, dear Sir George, we were dealing with the affairs
the leading
to Yours sincerely.
of a public cervice undertaking, has now been provisionally arplus, presumably, the amount are prepared (subject of course basis considered by
to confirmation by your share-
(signed) J. H. TAGGART. which could not safely be based will required for 1924 dividend.
on any foundation other than ond ranged which, it is hoped.
Sir George Gibb Agrees. On the question of purchase holders) to dispose as a going con-men of this Colony (many of whom and whilst I have no are in positions that preclude them doubt that the new prove satisfactory to all parties
consideration this meeting proved cern of the undertaking of the from taking benefit financially would naturally avall itself of the
Sir George Gibb then called which was practicable and reason- concerned,
One important polat China and Japan Telephone and The negotiations on behalf of abortive.
thelcas this is a matter which was prepared to agree to the alter-view of the general public, who local gentlemen interested in the transpired, however, with refer- Electric Company, Limited, to any way from a settlement that services of the Oriental Telephone
ence to the Plant, and that was new Company to be formed in might unduly favour the proposed Company as its agents, never-upon Mr. Taggart and said he able from the several points of formation of a Ilongkong Tele-
would so confirm his decision in who provide the capital, both exist- phone Company were conducted that it would be necessary for it Hongkong; on receipt of which new company), to be not only a
express this of the negotiations.
In the meantime, Mr.Ing and future; and the Govern- by Mr. J. H. Taggart, at the re-to be subjected to thorough. tests again placed the matter before the fair but an exceedingly reasonable cannot be dealt with at this stage native basis of settlement and are our customers; the investors
endeavour to If, after having given the above writing. quest of Sir Paul Chater, and we before being taken over by the new gentlemen interested with me in
Gibb for his consideration a state-as the guardian of all interests understand that the conduct of company, as the Government was the proposed formation of n loen opinion, not in an the negotiations between Mr. not altogether satisfied as to its Company, I have to inform you fuence you against your own proposal your careful considers-Taggart handed to Sir Georgement, whose nanstion is necessary,
con-judgment in the case, but that you tion, you are still unable to as the result of our In order not to cam-that,
draft Conditional Agreement, now in- Taggart and Sir George Gibb was condition.
not effect that would thereby be creat-agreement on the lines
On February 3 Sir George Gibb characterised throughout by a pliente the negotiations unduly sideration of your statement, may fully realise the prejudicla! your way clear to effecting animent outlining suggestions for a concerned.I am. Yours sincerely,
ed in the minds of the local public dicated, it occurs to me. spirit of courtesy and goodwill in Mr. Taggart had proceeded on the terms outlined therein are
gestions for an Agreement, and It was then arranged that the. a genuine desire to appreciate and assumption that the Plant was in found acceptable,
You will doubtless recollect that (who, it must be remembered, will basis of settlement whereby prac-expressed his approval of the sug
be shareholders in the Hongkong tically sil the dimculties encoun-handed to Mr. Taggart the follow basis of agreement thus tenta- many diffieullies good and efficient working order
tively arrived at, and the schemo created by the controversies that (as the Company claim it to be), the difficulty with which I
Hongkong, February 3, 1925. under which it was suggested that undoubtedly prejudiced the case but it would of course require to confronted in the matter of re-company whether it be promoted tered in connection
Dear Mr. Taggart-I have re-the now company should operate, will pro-be technically examined and satis commending that we should meet by you or hy us, and on whom the endeavours to effect an agreementing latter: when, as our readers
hitherto pursued, may possibly be underfactorily reported upon before be-you as regards the difference of Company must depend for its following the course bably remember, it was
Mutters having $103,776 was my inability to resource of revenue).
arrived at by adopting the alter-ceived your letter of the 2nd be submitted for approval to the Difficulty of Assessing Assets. discussion on the former occasion. Ing purchased.
for having replied so promptly ties had been in close touch reached the stage above indicated, concile an increase to the asseta
Eside of the Schedule No. 5 (setting Furthermore, with all deference native method we tentatively dis-instant and I am obliged to you Government (with whom the par- An Exchange Question.
Sir George Gibb on the 30th Janu-
the Committee of the Chamber of arrived at a purchase considera already lald itself open to severe ncgotiations. I refer to the sg January 30,
Your letter contains some things Commerce. Consequently a meet- tion of $1,427,371-then increased criticism by reason of the con-gestion that the proposed new com-
in ficting statements made by its pany should take over the business which, if I were in a controversial ing was held at the office of the as explained by $4,025, Schedule No. 5a, to $1,131,396), in representatives from time to time: of the existing Company as a going mood, I could present in a light Hongkong Chamber of Commerce a going concern, viz: that the
such a way as justifiably to ac- this is substantially supported by concern on July 1, 1925. If that very different from that in which on February 9, and was attended proposed new Company should
Dear Mr. Taggart.--I think it count for the $103,776 in question. the authoritative statement made method were adopted, I suggest your extremely able advocacy bas by the Committee of the Chamber the 28th that the definite form which it presented them. But the business (Mr. G. M. Young being in the take over all the Assets includ-ja desirable and, in order to avoid) Your auggestion to the effect at the meeting held on
effect that Mr. should take should be as follows with which we have to deal is to Chair in the absence of Mr. J. ing profits for the year 1924) and the possibility of any misunder-that such increase should be plac-ultimo tu the
serious and urgent for me to yield Owen Hughes through indispost- Liabilities of the present Company standing hereafter that I should ed to the figure I had arrived at Parker Ness informed the Govern- Subject to the report of the Hongkong Goy-
to any temptation, by answering Intion), the gentlemen who in 1922 as from the 1st January, 1925, for record in writing, as I have donc for the piant, etc., and thus augment in March, 1920, that the Com-
ernment's representa-
detail, points of controversy which formed the Joint Chambers of consideration of purchase
on the enclosed statement, the ment my figure of $1,155,000 by pany was being run at a loss—in
have tive being satisfac-
verbally. discussed unfortunately $1,431.396 (afterwards increused terms on which I am willing to $108,776 18.
for fact, even two years later, Mr.
Commerce Telephone Sub-Com- such argument, impracticable, før Parker Ness actually gave the Gov-
tory to those propos- to 81,467,591 as explained in Mr.
through many days, to spoil my mittee (with the lamentable ex- agree.-Yours very truly,
loca!
recognition
the ing to form a
of
reasonable i find that so far from being ableernment to understand that the
ception, of course, Taggart's letter of the 2nd Febru-
of Mr. A. R. to justify an inercase to that item concern was penetlenlly bankrupt.
company, the value of
spirit in which you make a final
Lowe), Mr. A. G. M. Fletcher ary, 1926, to Sir George Gibb).
effort to bring to a practical bust-(Assistant Colonial Secretary) on Meetings between Sir George Gibb
the plant be taken have, if anything, already erred Furthermore, at the meeting parti
.$ 1,155,000 nesa-like conclusion the strenuous and Mr. Taggart took place prac-
on the side of liberality, inasmuch
endeavours we have made to find behalf of the Government, Bir tically daily, but an agreement on
Terms to which Sir George as the letter 1 received from the cular stress was laid-upon the fact
Hatisfactory settlement of the George S. Gibb, the gentlemen in the basis above proposed was not
S. Gibb on behalf of the existing Government in which the figure that Committees appointed to re-Plus net additions made
the telephone queation
telephone situation, which, alterested in the proposed forma- found practicable, inasmuch as
Company is willing to agree for plant is indicated as not to port on
though essentially simple, had betion of a local company, ate, Sir George Gibb asked for an ad-
with the Hongkong Syndicate, exceed $900,000, is under date were always confronted with the
come no difficult and complex as! It was stated at that meeting dition of $103,776 to be made to
subject to approval of the June, 1923, whereas the Company same difficulty in endeavouring to of the assets;
nearly to baffle our attempts to that the promoters of the now com- the 6gure of $1,431,396 in order
Shareholders.
has already benefited by my hav-assess the value
491,335 clear it up.
pany proposed to submit to the ing taken the $900,000 value as atuarely, that the company had not disclosed the exact position of
I will therefore confine myself Government an application for a It is proposed to form a 1922. Consequently I conceded a of exchange. The proposed pur-
iran it at June 30,
to saying that i am glad, from telephone franchise covering a chase consideration of $1,431,396 new Company, to be registered in point in allowing the "Nett addi.ffairs. It is indeed remarkable Stores in hand and in
many points of view, to be able, on period of fifty years and providing equalled £178,924. 10/- when Hongkong, with an issued capital tions, 18,464" for the year 1922, that the Company, having at its
1925, at a valuation to
behalf of my Board, and of course a minimum nett return to the com- taken at $8.00 to the pound (the juf $6,000,000 in 500,000 shares of However, in view of the fact that disposat an experienced technical
be agreed upon .... rate adopted by the Telephone $16, to purchase and carry on the
the plant is to be staff and Mr. Parker Ness being
fact that the resultant figure being settled subject to shareholders' approval, pany of 8 per cent. per annum. Company in its annual accounts undertaking of the existing Com-subject to the Government repre- so fully aware of the
return of 9 per cont. in view, but pany, to get an extension for 50sentative's report (as the result the value of the plant was neces- by the issue of one hundred and to agree to the terms set forth in The promoters had had a malsimum I trust that I may be permitted as the Government considered years of the term of the existing of the decision of the meeting held sarily the main point at issue; has forty thousand Ordinary Shares of pages 8 and 9 of your letter. licence, to get an immediate in-an Wednesday, the 28th ultimo) not even yet, despite the fact that $10 each, credited as fully paid up, crease of the authorised flat rate provided such report is to the three years have elapsed, pre-and the balance of the purchase to add two remarks. Firstly that that 8 per cent, was a more rea- I greatly regret, and I am sure sonable figure, they had been quite from £10 or its equivalent effect that the plant is satisfae daced data setting forth the basis consideration being paid in cash.
The new company would not, that in this I am also exproseing willing to adjust their views ac- dollars per Exchange Line to $108tory, and that nothing arises to upon which the Company itself that the figure which had been and to get authority to charge on occasion a material revision of arrives at a plant valuation-nei-under this alternative scheme, take the feeling of my colleagues, ou cordingly. It was proposed that suggested as a basis of settlement, a message rate basis, either on the $1,155,000 figure, I would not, ther does it appear that the Com-over the profits, cash balances, debthe Board of my Company, that the new franchise should ranc- the Company did not, on a pre-will prove sufficient, to ensure subject to adjustment on theor before completion of the pro-in fairness to you, now think at pany bas attached sufficient im-tors, creditors, debentures, or unyany impression should exist that tion rates which it is estimated Jam aware that portance to the negotiations as to of the liabilities of the existing vicus occasion, produce any data auch minimum return to the com- figures shown in the 1924 Balance posed new plant and extensions, reducing it,
setting forth tho basis upon which pany, after payment of expènses, Sheet, should be increased from rates which will be adequate to you claim the additions to plant produce schedules showing the Company.
Difculties Cleared Away. they had arrived at their valuation depreciation, reserve, etc. $1,431,396 to $1,535,172, Mr.enable the new Company to pay made in 1924, but as I have point-nethod by which its Balance Sheat
The I venture to think that as many of plant. It rather puzzles me to reasonable basis, and in this con- Taggart admitted that if the pur- a minimum dividend at the rale ed out in Schedule No. Da, the 1994 figures have been arrived nt, clue consideration were to be of 9% per annum on their issued additions were taken into account absence of such particulars and of the difficulties which originally understand how that impression nection if the new company is making all usual in arriving at my estimated valus consequent paucity of Information appeared to be in the way of its can have arisen, for I know that duly formed and commences opera- puid wholly in cash, and the pre- capital after
tion, but were offset by deprecia has inevitably created an atmos-adoption have, during our closely the Company took the step of send-tion for the second half of this sent company required sterling, proper reserves, then £178,924. 10/- would, at the
The price to be paid for tion to December 31, 1924 that phere of doubt and, to say the pursued and detalled discussioning to Hongkong their Consulting year), the rate per Exchange Ling the whole of the shares in the is to say, that assuming the least, has rendered it exceedingly been cleared away, it has much to Engineer, Mr. W. W. Cook, will probably be $108 from July 1, current rate of exchange, cost the
approximately existing Company, 39,761 shares equivalen: of £13,000 be added in dificult to those lacking the neces-commend it. I cannot help think-telephone expert of the highest 1927, instead of £10 per annum new company $1,635,172 (the figure now asked of £1 each, to be $1,483,280, pay-respect of 1924 additions, then at sary technical knowledge of the ing that it is now the best way in eminence, who made valuations, in approximately $84) as at pre-
least an equal sum for Deprecia-plant to formulate definite ideas which we can arrive at a final complete detail and at great labour sent. In estimating the for by Sir George Gibb), but con- able as follows:-
140,000 fully paid shares
tion should be deducted from the as to the actual present-day value settlement and that it would avoid and cost, of the then value of themessary to be charged to ensure tended that as it was proposed to
of $10 izi the new
result in order to arrive at the thereof. Such attitude оп the the possibility of any questions Company's plant on the established
satisfactory working of the now satiny $1,400,000 of the purchase
Compuny
$1,400,000 price to be included for the plant part of the consideration by the inste of 140,- 1
prosent Company arising as to the allocations of pro-basis which would be adopted by compan, it was found that ap- 83,280 as it stands to-day (vide Schedule leaves no alternative but for us to fit to the date of the transfer of any arbitration
preximately $108 per Exchange 000 shares of $10 ench in the new Cash
No. 5a).
proceed on the basis of the figure the undertaking (June 30, 1925). had to assess the value
[ine altuld provide an economica! company. credited as fully-paid
of $900,000 indicated by the Gov-1 have also in mind that by purs, phone plant. Mr. Cole of Shang-tan, and, a matter of fact, up, no exchange, question arose.
A Concession.
ing this course, the present Com-hai, as the Telephone Committee rate of $108 per annum is that ernment. na (except for a small haine of
the Telephone recommended by about $10,000 no actual Qani
In the matter of the properties,
two otherpany might not be under the neces-stated in their report, made arsets and pay all Habflities of admittedly you have some justl5-|
| Squ-Committee 1922 for the year would be passing. Apart from
the existing:
1924, so that in being charged this question, it appeared that Sir
Company as from eation in contending that I should points in your statement indientity of going into liquidation, but similar valuation, on
cide it might continue in being the records show, all facilities and the rate of $108, the pubile will George Gibb"did not fully realise the 1st January, 1925, subject to have taken the Duddell Street ing that we are not ad idem, for that should its Directorate so do the Government, and, so far that the purchase consideration payment to the existing Company property at the valuation given to instance:
(otherwise; of course, than opera-information were granted to him have had the beneft of the $10 proposed was arrived at on a basis fo the balance of the net revenue you by Mr. Bird (1.e. $60 pėr
In paragraph No. 1 you refer totions in the Colony of Thongkong for the purpose, which would give the new com account for the year 1924 after sq. ft, whereas for reasona al- pany the profits of the business deduction therefrom of 27,500 as ready explained based on the fact charges "on a message rate basis and territories in South Chinn tons, perliaps anturally, did not.
experience. Should the rates sanctioned for 1924, for he wished to reserve reserves for credit of the Deben- of our inability to dispose of the either on or before completion of are concerned), substituting for come out at the same figure. than was anticipated. three years pany of more than the minimum. |ture Sinking Fund and Staff Pen-property so long as the Central the proposed new plant and exits present assets the holding of confess that, in my
of shares in the new Hongkong com- such valuations, in which many of salt in a return to the new-com-
the factors must be maltors of jexchange in located in the build- The Oriental Telephone &ling), I deemed it prudent to take plant, extensions, rates and so on,pany.
I do not lose sight of the fact opinion, rarely do agree. But all of 8 per cent per amum but not more than 12 per cent, the benefit will was only Therefore, on the 28th January, Electrie Company Limited, who the mais as $55 per sq. fi., and as I have emphasised several
dis-that this suggestion did not appeal the facts are there; it
excess of profit above 12 per cent. when am ting was held in Sir are the owners of 38,077 of the atill consider the latter figure Lines in the course of our
However, it la cussions, must be dealt with en-to you at the time I first mentioned the opinions which could not be accure to the Company, but any Pnal Chater's office (attended by shares of the existing Company, to a very fair one, Sir George Gibb, the local gentle-have the right of nominating two thought that it might perhaps he tirely by the new Company un-it, but in the light of the present reconciled. You and I, following to be divided as to half to the men interested in the formation Directors of the new Company, considered somewhat unreasonable feltered by any ideas preconceived circumstances, I am inclined to different methods, have found a of a company in Hongkong, repre- one of whom may act and attend for a local company to decline to either by your Company or by any look upon it as the logical one to way to peace, and, I hope, to the company and hait to be spoiled agree to a valuation made by al other person interested In this follow. Nevertheless, should it provision In the immediate futurs (in nome. manner to be agreed up- Acentativen of the Government and Board meetings by substituto.
the local Chambera of Commeres), The Driental Co. to be the local architect of the professional matter at the moment, in which still bot appeal to you.I trust you of ample telephone accommodation on) for the benefit of sub
agenta for a
reasonable standing of Mr. Bird; therefore, relation it must be obviors that we will realise that in again sub- under local direction, and by the cribers. The Company's maximum the position was that Mr. Taggart sole was prepared to recommend (sub-period, to be agreed, for the pur-we are prepared to concedo this cannot commit a local public utilitymitting it I am merely actuated co-operation of capital. from our nett divisible return, however, in ject to satisfactory arrangements chase of requirements of the new point, thereby increasing the company to any particular line of by a desire to do all I can to bring Home country with local capital, to be 15 per cent. per annas being made with the Government Company outside Hongkong and figure of, $455,140 for Land and policy at this juncture, our sole matters to a successful conclusion for the rapidly growing needs of It is reasonably exposted that the New Territories, China and Buildings by $36,195 to $491,886, objective at this stage of the pro- rather than that all our negotia Hongkong and the New Territories rate of $108 will remain fe feretu for a fifty years' franchise to a
and, in turn, the purchase con- ceedings being the acquisition tions should now prove aber-In South China.
lu reconcile a question of rates
NO
of recent years), but its sterling equivalent would not be so much much રામ £178,924. 107 (representing £4.104- per share) at the current
(any $8.68); therefore. Sir George Gibb asked
rate
1.
2.
$1,-183,280
. The purchasers to take all
29,910 for payment of a dividend
in respect of that year.
The Plant.
sion Fund accounts.
¿.
G.
Japan.
the state of
There are
OHC (71
questions
Tho tensions."
tribunal whe
of tele-
behalf of
#8
These valita-
an
rate
rate for eighteen months longer
(Continued on page 12)