Hillhouse says it has no interest to take Soho China private

Business | 13 Nov 2020 2:39 pm

Hillhouse Capital Management said it has no interest in taking Soho China private. The Chinese property developer’s stock pared gains, reported by Bloomberg. 

Soho China earlier advanced as much as 41 percent after Reuters reported that Hillhouse was in talks to take the developer private, citing unidentified people. Its shares traded 7 percent higher following the emailed statement from Hillhouse. Soho didn’t immediately reply to questions seeking comment.

Soho had been shopping around for a deal for months, saying in August that discussions with potential investors had been terminated and the company hadn’t entered into any formal agreement. Negotiations with Blackstone about a potential investment were derailed after the coronavirus outbreak made it difficult to assess the developer’s business outlook, people familiar said previously.

Private equity firm Hillhouse Capital Group is in talks to take property developer Soho China private, said four people with knowledge of the matter, in a deal that could be worth more than US$2 billion (HK$15.6 billion) and accentuate a trend in Hong Kong, reported by reuters.

Asia-focused Hillhouse has been in discussions with SOHO China over the past few months, said the people. The husband-wife team of Chairman Pan Shiyi and Chief Executive Zhang Xin owns 64 percent of the mainland developer that is well-known for its futuristic office buildings.

A deal for taking SOHO China private could come after Hong Kong-listed companies have announced take-private deals worth US$20 billion so far in 2020, more than double last year’s annual volume, according to Refinitiv data. Undervalued shares were often cited as a reason for such deals.

But with so much cash available with private equity and other long term investors and a dearth of avenues to earn decent returns, average premiums paid by buyers for those deals jumped to 42 percent this year from 34 percent in 2018, as per Refinitiv.

Shares of SOHO China soared more than 40 percent in afternoon trade on Friday after Reuters reported the take-private talks.

Before Friday’s surge, SOHO China had a market value of about US$1.5 billion and its shares had slumped 24 percent this year, compared to an 8 percent fall of the benchmark Hang Seng Index.

Hillhouse is also considering assuming about 18 billion yuan (HK$21 billion) of SOHO China loans as part of its leveraged buyout, said one of the people. The developer had 33 billion yuan in total debt as of end-June, according to its 2020 interim report.

The SOHO China talks are at an early stage and subject to change, said the sources who declined to be identified due to confidentiality constraints.

Hillhouse declined to comment. SOHO China didn’t immediately respond to a request for comment.

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