Blackstone makes US$3.05 billion offer for Soho China to pick up real estate assets at 40 per cent discount with eye on recovery

Blackstone to offer HK$5 per share for Soho China, valuing the entire firm at HK$26 billion or 31.6 per cent above market price
Blackstone intends to revamp company board, retain its listing status while co-founders Pan Shiyi and Zhang Xin to exit post-offer

Soho China

Pearl Liu

Published: 9:04pm, 16 Jun 2021

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US private equity group Blackstone Group revived its pursuit of Soho China with a HK$23.7 billion (US$3.05 billion) offer for the Chinese office developer, expanding its footprint in the mainland market with one of its biggest real estate acquisitions in the region.

The firm offered to buy the Hong Kong-listed firm at HK$5 per share, or 31.6 per cent premium over the stock’s last traded price, the company said in a stock exchange filing late on Wednesday. The company’s shares surged 48 per cent last week because of speculation, the most since the Beijing-based company went public in 2007.

The US firm, which manages about US$196 billion of assets globally, has won commitments from 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.

Zhang Xian and Pan Shiyi. Photo. Zhang Xian/Weibo

The pair was credited with a 63.9 per cent stake in the firm, according to its 2020 annual report. They will exit from the firm by tendering 2.86 billion shares, or 54.93 per cent of the company, for HK$14.3 billion, while retaining a 9 per cent stake post-offer, according to the exchange filing. Goldman Sachs is advising Blackstone on the offer.

At HK$5 per share, Blackstone will be buying Soho on the cheap, at about 40 per cent discount to the group’s audited consolidated net asset value of HK$8.37 per share at the end of 2020. The firm has been investing in office, retail and logistics assets in China since 2008, owning about 6 million square metres (64.6 million sq ft) of property there.

Developer Soho China says privatisation deal with Blackstone is dead

“China is a key market for our Asia business where we have built a diverse real estate portfolio across office, retail, logistics and residential,” Justin Wai, real estate managing director based in Hong Kong with Blackstone, said in a statement on its website. “We’re confident in China’s long-term potential and economic recovery, which is well under way particularly in the Beijing and Shanghai office markets.”

Soho China owns and operates commercial properties totalling 1.3 million sq m, including five office and retail properties in Beijing and four in Shanghai.

Blackstone Group pursuit of Soho has paid off. Photo: Reuters

Blackstone will review the composition of the board and undertake a strategic assessment of Soho’s property holdings after the exercise, according to the filing. It also intends to satisfy the public shareholding float and retain Soho’s listing status, the company said.

Soho China, which commissioned the late Iraqi-British architect Zaha Hadid to design several of its office buildings in Beijing and Shanghai, put 20,000 sq m of space on the market for 7.8 billion yuan (US$1.12 billion) in June 2019 to bolster its liquidity.

Blackstone was to pay HK$6 per share for Soho in a privatisation offer, Reuters reported in March last year. As the Covid-19 pandemic gripped China and global markets, Soho in August called off discussions with prospective investors without identifying any parties.

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