Soho China sinks 25pc as Blackstone deal fizzles

Shares of mainland commercial property operator Soho China (0410) plunged as much as 28.4 percent yesterday, the biggest decline on record, after Bloomberg reported Blackstone's talks about a potential investment in the developer have stalled.

The private equity firm's discussions are no longer progressing after the coronavirus outbreak made it difficult to assess the developer's business outlook, according to people with knowledge of the matter. Recent turmoil in the debt market introduced concerns about arranging to finance for a deal. Blackstone's discussions around investment in Soho China were at an early stage, and could resume once conditions have stabilized, said the people.

A representative for Blackstone declined to comment. Soho China did not immediately respond to requests for comment.

The stock pared its losses before closing 25.6 percent lower at HK$2.75.

The Beijing-based developer said in a Hong Kong stock exchange filing on March 11 that it was exploring the possibility of a strategic partnership with overseas financial investors, which may lead to a general offer of its issued share capital. Soho China didn't identify the investors in the statement.

Reuters reported last month that Blackstone was in exclusive talks to take Soho China private in a US$4 billion (HK$31.2 billion) deal, citing unidentified people, which sent the target's shares to a 21-month high.

Blackstone entered exclusive discussions in early February with the developer and had offered HK$6 per share to take the company private, according to the report.

The price represented an almost 100 percent premium to the HK$3.03 average price of Soho China's shares in January. The US firm would also take over the debt of Soho China, which stood at 32.68 billion yuan (HK$35.88 billion) as of the end of June 2019, according to its interim report.

Soho China's investment properties were valued at US$8.78 billion as of the end of June last year, showed its 2019 interim report. The developer started to sell prime commercial property assets last year as its founders looked to shift their focus to overseas markets.

Soho China was founded by chairman Pan Shiyi and chief executive Zhang Xin in 1995. The company holds 1.4 million square meters of prime office space in Beijing and Shanghai, according to its website.