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Galaxy Soho real estate project in Beijing, designed by Zaha Hadid Architects. Photo: Handout
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Blackstone drops US$3.05 billion offer for Soho China amid regulatory review of takeover of the largest developer in Beijing

  • US private equity giant offered HK$5 per share for Soho, valuing the Hong Kong-listed developer at HK$26 billion (US$3.34 billion)
  • The parties cited lack of progress in meeting the deal conditions by its December deadline
China property
Georgina Lee
Georgina Lee
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US private equity giant Blackstone Group has abandoned its US$3.05 billion offer to buy developer Soho China, halting its expansion plans in the mainland Chinese market through one of its biggest real estate acquisitions in Asia.

The firm decided not to proceed with its HK$5 per share offer for the developer, citing the lack of progress in fulfilling the conditions by the targeted completion date of December 31, according to an exchange filing on Friday. That offer in June valued the entire listed firm at HK$26 billion (US$3.34 billion).

All parties in the deal agreed not to extend the deadline, the statement added.

The cancellation came after China’s antitrust regulator, State Administration for Market Regulation (SAMR), last month started reviewing the transaction. Friday’s announcement did not say if it was related to the regulatory scrutiny. However, the review by the antitrust watchdog was one of the prerequisites that had to be satisfied for the deal to go through when the proposed sale was announced in June.
Soho China chairman Pan Shiyi and CEO Zhang Xin pictured in March 2016. Photo: Dickson Lee.
The antitrust review of the Soho deal came in the midst of fraying ties between China and the United States. Since US President Joe Biden took office in January, his administration warned US businesses about the risks of investing in China because of Beijing’s tightening grip over Hong Kong, and its escalating crackdown on industries ranging from e-commerce and real estate to private tutoring firms, sectors deemed as having too much sway over China’s economy.

Blackstone, which manages about US$196 billion of assets globally, had won commitments from Soho chairman Pan Shiyi and chief executive officer Zhang Xin for 54.9 per cent stake in the firm, which the husband-and-wife team built from 1995 into a major mixed-use residential and commercial property developer.

The deal’s cancellation also comes at a time when Beijing is placing increased scrutiny on tycoons and private entrepreneurs. President Xi Jinping has called on Chinese companies and wealthy individuals to “give back to the society” to reach the country’s goal of “common prosperity” and help reduce the nation’s wealth gap.

This has seen leading Chinese tech giants including Alibaba Group Holding, the owner of this newspaper, Tencent Holdings and Pinduoduo earmarking tens of billions towards this goal, as they heed Beijing’s call and boost their philanthropic efforts towards rural development, health care and education.
Soho China’s Wangjing Soho commercial complex in Beijing. Photo: Simon Song

Soho China owns about 6 million square metres of property in China. It also owns and operates commercial properties totalling 1.3 million square metres, including five office and retail properties in Beijing and four in Shanghai.

A successful sale to Blackstone would have reduced Pan and Zhang’s combined stake in the company to 9 per cent, enabling them to exit the property group and reduce their hard assets in the country.

Investors cheered the termination of the deal that was pitched to investors at a steep 40 per cent discount to Soho China’s net asset value.

Shares of Soho China jumped 9.4 per cent to HK$3.50 at the close on Friday.

This article appeared in the South China Morning Post print edition as: Blackstone drops US$3.05b Soho China bid amid scrutiny
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