SOHO China shares slump on collapsed buyout deal

Shares of Hong Kong-listed property developer SOHO China tumbled sharply on Monday after private equity giant Blackstone scrapped a proposed $3 billion takeover of the real estate company.

Market experts suggested the public should take a rational attitude toward such deals, and Chinese enterprises may get inspiration from this when dealing with multinational mergers and acquisitions.

Beijing-based SOHO China announced last Friday that due to lack of progress made in meeting the prerequisites, parties involved in the company's tender offer believed it is impossible to reach the prerequisites before or by the deadline.

Shares of SOHO China sank up to 40 percent during Monday's session before ending the day 34.57 percent lower at HK$2.29(29 cents) per share.

The decision means the plan by Blackstone Group to acquire a controlling stake in SOHO China for some $3 billion will not go through, less than three months after the decision was announced.

In order to remove the company's continuing obligations under the acquisition rules, all parties decided to withdraw the offer after consulting the executive officials, the company filing said.

Liu Junhai, a professor at the Renmin University of China Law School, said there is no need to read too much into the deal not going through.

"It is worth mentioning that equity transfers often contain huge uncertainties, particularly those involving cross-border investors. The risks can be market risks and commercial ones," Liu said.

Three preconditions were set for the tender offer, the first of which is a notification of concentration of undertakings submitted to the State Administration for Market Regulation by the one making the offer, and the offer can be approved or reasonably accepted under China's antitrust law.

Liu said the preconditions showed Blackstone is very cautious, highlighting its experience in handling global acquisitions.

"The delicate tender offer preconditions give Blackstone an advantage to avoid being trapped in a passive condition. Thus, this would enlighten our Chinese enterprises during their equity acquisitions abroad," Liu said.

In August, the property developer said that the State Administration for Market Regulation looked into the proposed acquisition. Such a review is regarded as normal as all M&As taking place in the country should abide by China's antitrust law.

Later on Sept 6, SOHO China said in a filing the offerer learned from the State Administration for Market Regulation that the investigation was still underway. It was uncertain when the investigative procedure would end. There were no preconditions reached by the time of the filing.

It was uncertain what caused the decision that led to the failure of SOHO China's second attempt to sell itself.

In March 2020, SOHO China said that it was in talks with overseas financial investors on a potential deal which could promote a bid for the company. But later that year in August, the property developer said previous talks with potential investors had been terminated.

SOHO China was founded jointly by its chairman Pan Shiyi and Pan's wife, chief executive officer Zhang Xin, in 1995. The company is controlled by the billionaire couple.

News of the potential takeover this summer immediately sparked rumors among Chinese netizens, suggesting the couple is trying to sell their properties in the country. Based on public information, the couple's stake in SOHO China would shrink to 9 percent if the deal succeeds.

The Pans built their fame as a major commercial property developer by riding on China's economic boom. Their company's key assets include the signature Bund SOHO in Shanghai and the landmark Wangjing SOHO in Beijing.

However, nearly 30 billion yuan ($4.65 billion) worth of SOHO China's properties have been sold since 2012, the National Business Daily's analysis reported.