Soho China rallies most in 15 months on Blackstone’s US$3.05 billion offer for control of mainland developer

Founders Pan Shiyi and wife Zhang Xin to tender almost 55 per cent stake in the company and exit from the firm post-offer
Soho China owns and operates commercial properties totalling 1.3 million square metres in Beijing and Shanghai.

Stocks

Zhang Shidongin Shanghai

Published: 10:24am, 17 Jun 2021

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Shares of Soho China surged by the most in 15 months in Hong Kong trading after Blackstone Group offered as much as HK$23.7 billion (US$3.05 billion) to take control of the mainland office and retail developer.

They jumped 21 per cent to HK$4.60 in Hong Kong trading for the biggest gain since March 2020, as the stock resumed trading after being suspended over the past week. The shares had already rallied earlier this month on speculation the US private equity giant was reviving its pursuit of the firm to expand its property investment in China. The current price values the entire firm at about HK$24 billion.

Blackstone offered HK$5 per share, or a 31.6 per cent premium over Soho’s last traded price, for as much as 91 per cent of the firm. Chairman Pan Shiyi and chief executive officer Zhang Xin, the husband and wife team who built Soho from 1995 into a major commercial developer, have agreed to tender 54.9 per cent of their stake.

The exterior of Soho Tianshan Plaza in Hongqiao, Shanghai. Photo:SCMP/Peggy Sito

They will retain a 9 per cent stake post-offer and exit from the company, according to an exchange filing late Wednesday. Blackstone plans to reassess its portfolio and strategy and aims to maintain the stock listing status.

While China’s residential property has long remained a target of government crackdown, analysts are upbeat about the market outlook, because the commercial property sector is relatively insulated from policy tightening.

Pan Shiyi, chairman and co-founder of Soho China during a media briefing in July 2017. Photo / Handout

“China’s economic growth, rising income and urbanisation have laid a foundation for the long-term development of the commercial property market,” said Yuan Hao, an analyst at Shenwan Hongyuan Group in Shanghai. “Some data such as per-capita expenses on shopping malls far lags overseas and that indicates the huge potential of the commercial market.”

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

Soho China owns and operates commercial properties totalling 1.3 million square meters, including five office and retail properties in Beijing and four in Shanghai. The firm distinguishes itself from a host of mainland developers that focus primarily on residential projects.