Blackstone bails on $3B acquisition of Soho China

Investment giant cited “lack of sufficient progress” from regulators amid increased government scrutiny

Blackstone CEO Stephen Schwarzman and Soho China CEO Zhang Xin (Getty)
Blackstone CEO Stephen Schwarzman and Soho China CEO Zhang Xin (Getty)

Blackstone has pulled the plug on its $3.05 billion acquisition of Soho China, initially announced three months ago.

In a regulatory filing on Friday, the investment giant revealed it was killing the bid, a 30 percent premium on Soho China’s stock price, over a “lack of sufficient progress” from government regulators needed to approve the deal, according to CNN.

Soho China has developed over 54 million square of real estate in China since its founding by Zhang Xin and her husband, Pan Shiyi, in 1995, according to its website. The Blackstone deal was scuttled amid efforts by the Chinese Communist Party to pursue “common prosperity,” including increased scrutiny of foreign investments and pressure on business magnates to share more of their wealth. The move was seen as a way for the couple to reduce their exposure to China; Xin and Shiyi were set to retain a 9 percent stake in the firm under the original terms of the deal.

For Blackstone, the deal would have been its biggest investment in China yet. Soho China first revealed discussions with overseas investors back in March, but the pandemic put those talks on the backburner as declining rents in major Chinese cities and a dearth of projects in the pipeline placed the office developer under increased financial pressure.

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The New York Times reports that shares in Soho China fell by one-third on Monday on news of the scuttled deal.

Soho China isn’t the only major Chinese developer facing a perilous financial situation. The ongoing spiral of the country’s second-largest property developer, Evergrande, has investors fearful of a collapse that could have a broad impact on the country’s property markets. In July, it was revealed that the deeply indebted company’s stock price had dropped 70 percent year-over-year. At the time, Evergrande was facing with close to $300 billion in liabilities.

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[CNN] — Holden Walter-Warner