Blackstone’s Planned US$3.05b Purchase Of Soho China Scuttled

CHINA – Chinese office builder Soho China stated that it has failed to fulfil all of Blackstone’s preconditions that would have let the latter proceed in acquiring the former, according to recent reports from Investing.com and ChannelNewsAsia (CNA).

This follows a June report that said American investment giant Blackstone is close to concluding the acquisition of the Hong Kong-listed office builder for up to HK$23.7 billion or US$3.05 billion. This translated to HK$5 per Soho China share and represented a 31.6 percent premium to its valuation in June 2021.

Soho China announced back then that the divestment required the approval of the Chinese competitions regulator. Thereafter, China’s State Administration for Market Regulation formally agreed to review the sale in August 2021.

However, 2 persons privy to the transaction informed Reuters that the State Administration for Market Regulation didn’t want the sale to proceed, and one of the sources added that the regulator “just went silent.”

This is even though the deal would have been largest property buyout in China.

The source said they think President Xi Jinping’s campaign to attain common prosperity that aims to narrow a wealth gap in China probably played a part in the watchdog’s refusal to approve the sale amidst the likelihood that the owners of Soho China plan to invest the proceeds from the sale in offshore markets.

Notably, husband-and-wife founders Chairman Pan Shiyi and Chief Executive Zhang Xin own 64 percent of the Chinese office developer. They’ve been looking for an acquirer for their prime commercial properties as they’ve been planning to shift their focus to offshore markets.

Soho China has been on the market since early 2020, as the office builder has been looking forward to net proceeds from a divestment to help it ease issues arising from a dearth of assets on the pipeline and falling office rents in key Chinese cities. The company has also been facing intensifying clampdown on property developers by Beijing that impacted their liquidity and limited their borrowings.

Following Blackstone’s failed acquisition of the office builder, shares of Soho China plunged 40 percent on Monday, representing the largest daily drop since the firm’s IPO over 14 years ago.