Original title: Blackstone terminates its tender offer to acquire SOHO China, or is it difficult to find a successor facing delisting?
Pan Shiyi’s sale of SOHO China can be described as twists and turns. On September 10, SOHO China Co., Ltd. (“SOHO China”) issued an announcement stating that the Blackstone Group had decided not to make an offer to acquire all the shares of the company, which meant that Blackstone had terminated its acquisition of SOHO China. The transaction amounted to nearly HK$25.7 billion. The acquisition ended in miscarriage.
It is worth paying attention to, what impact will this incident have on SOHO China? In the next step, will Pan Shiyi still find companies to take over, and will he sell SOHO in China?
Blackstone terminates acquisition of SOHO China
On September 10th, SOHO China issued an announcement stating, “In view of the current insufficient progress in meeting the prerequisites, the offeror, the promising party, the promising shareholders and the company have jointly assessed the ongoing evaluation procedures required to meet the prerequisites, and the The possibility of completing the procedure within the timetable. All parties agreed that the prerequisites could not be met on or before the deadline, and all parties also agreed that the deadline would not be postponed. In order to release the company’s continuing obligations under the Takeover Code, And to maintain an orderly stock market, the parties have decided and unanimously agreed not to make an offer after consulting the executives. The offer period has ended on the date of this announcement.”
According to the information disclosed in the announcement, it means that Blackstone has terminated its acquisition of SOHO China. This is less than three months after SOHO China announced on June 16 that “Blackstone Group intends to acquire all the shares of the company with a cash offer.”
It is worth mentioning that on the same day, SOHO China’s stock price changed, and after the opening, the stock price rose by nearly 16%. As of the closing price, the stock price was 3.50 Hong Kong dollars, an increase of 9.38%, and the current total market value was 18.2 billion Hong Kong dollars.
Pan Shiyi sells SOHO China with twists and turns
A reporter from the Beijing News noted that as early as March 10, 2020, there was news that the Blackstone Group was negotiating with SOHO China on the privatization of the latter, with a transaction value of US$4 billion. On the evening of March 11, 2020, SOHO China issued an announcement stating that the company is negotiating with overseas financial investors to explore the possibility of strategic cooperation, which may lead to a comprehensive offer of all the company’s issued shares.
After 5 months, the privatization of SOHO China was finally settled with the result of “transaction termination”. On August 13, 2020, SOHO China announced that because the two parties did not reach a consensus on the potential transaction conditions, the earlier privatization offer was terminated on the same day.
On November 13, 2020, it was reported that Hillhouse Capital, an investment institution, had conducted preliminary negotiations with SOHO China to privatize it. Based on the average premium of the Hong Kong privatization transaction that year, the value of Hillhouse and SOHO China may exceed US$2 billion. However, afterwards, there was news that Hillhouse Capital had no intention of privatizing SOHO China.
On the evening of June 16, 2021, SOHO China formally issued an announcement stating that Two Cities Master Holdings II Limited, a subsidiary of the Blackstone Group, had a cash offer to acquire all the issued shares of SOHO China at a price of HK$5 per share and a maximum cash consideration of HK$23.658 billion. (Approximately US$3.047 billion) in order to obtain a controlling stake in SOHO China; after the transaction is completed, SOHO China will continue to be listed on the Hong Kong Stock Exchange.
After more than a year, Pan Shiyi decided to sell SOHO China to Blackstone. However, the price of 23.658 billion Hong Kong dollars, or about 3.047 billion U.S. dollars, is a 76% discount compared with the 4 billion U.S. dollars transaction consideration a year ago.
Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, said that at that time, Pan Shiyi’s attitude towards stopping losses and cashing out was very resolute. In addition, the liquidity of commercial real estate was inherently poor, and the prolonged trend of the epidemic affected the level of rents and full rents. The adverse effect has led to a large discount to the sale price, which is also caused by market changes and market conditions.
However, the acquisition did not proceed smoothly as scheduled. On July 6, SOHO China issued an announcement stating that it will delay the dispatch of the comprehensive document regarding the previous Blackstone tender offer because it will take additional time to meet the prerequisites and to prepare and implement certain information to be included in the comprehensive document; in addition, Independent financial advisers also need more time.
Subsequently, on August 6th and September 6th, SOHO China issued two announcements, disclosing the progress of the matter and stating that “no preconditions have been fulfilled.” Finally, on September 10, SOHO China announced that the Blackstone takeover offer was terminated.
The industry says SOHO China may delist
The question is, what impact will Blackstone’s termination of the acquisition of SOHO China have on SOHO China? In the next step, will Pan Shiyi still find companies to take over?
In this regard, industry analysts hold two different views. Some analysts believe that the incident has a greater impact on SOHO China and may lead to its delisting; some analysts believe that the impact of the incident on SOHO China is not very large. .
According to Lu Bingquan, Dean of Beijing Bozhixing Commercial Real Estate Research Institute, the incident is a big impact on SOHO China, which will not only affect its influence in the market and brand, but also in the capital market. , Will have a great impact on SOHO China’s ability to perform contracts and the normal order of the company’s operations. In addition, it is expected that there will not be a very suitable takeover person to follow up, because most companies that are able to take over may also take a wait-and-see attitude.
“From the perspective of SOHO China’s existing financing environment, I believe that the capital market will watch it more than act. This is also a wake-up call to shareholders.” Lu Bingquan pointed out that as to whether SOHO China will delist in the future, it remains to be seen. Observe, but at least the reorganization in the capital market, especially the structural reorganization at the company level (including the shareholder level) will be imperative.
In Bai Wenxi’s view, in the current state, it is difficult for SOHO China to find someone to take over. It is highly probable that it can only continue to operate or sell properties separately, and there is no need to maintain SOHO China’s listing status and delist. It is also a matter of high probability.
An industry insider who did not want to be named believes that next, it is estimated that the possibility of foreign investment and ordinary private enterprises is unlikely to take over, and the possibility of central enterprises is more likely to take over.
However, in the opinion of Xue Jianxiong, President of Utao City, the interruption of the tender offer will not have a big impact on SOHO China, and it should not be delisted. It is just that Pan Shiyi’s hope of quickly “clearing out” and earning a fortune has failed. make money.
So, for SOHO China, how should it develop next? In this regard, Chen Yunfeng, secretary general of the Zhongcheng Committee and chairman of Youpu.com, told the Beijing News that there are two possibilities for SOHO China: one is to continue to operate; the other is to go if you encounter a suitable buyer. Negotiate the possibility of sale.
Xue Jianxiong pointed out that for SOHO China, high-end commercial and office operations can develop normally, but the financial investment side needs to change related strategies: the sale of a single project, the introduction of financial and insurance funds, and the issuance of REITS. At the same time, “It’s just this way, it may be too slow for Pan Shiyi to make money, but the current practice of making quick money and big money by financial means is not so easy.”
Zhu Lingbo, Dean of the Asia Pacific Institute of Commercial Real Estate, pointed out that at the company level, the transaction could not be reached, and the projects are still owned by SOHO China. It is necessary to continue to maintain operations, or even better manage, to maintain asset appreciation. In addition, the project will continue to have normal operating income to ensure cash flow, and only when there are trading opportunities in the future can it have a more optimistic trend.
In the first half of the year, “price-for-volume” was obvious. Will SOHO China be sold in bulk?
According to the SOHO China financial report, SOHO China’s core assets are nine self-owned commercial-office projects in Beijing and Shanghai, including the Qianmen Street project in Beijing, Wangjing SOHO, Guanghua Road SOHO, Yinhe/Chaoyangmen SOHO, Lize SOHO, and Shanghai’s SOHO Fuxing Plaza, Bund SOHO, SOHO Tianshan Plaza and Gubei SOHO have a total leasable area of approximately 830,700 square meters.
Judging from the performance in the first half of the year, the average occupancy rate of SOHO China’s investment properties with stable operations in Beijing and Shanghai has increased by 12 percentage points year-on-year from 78% in the same period last year to 90%. Rental income only increased by 3% year-on-year, and the phenomenon of “price-for-quantity” is more obvious.
In this context, in the future, will Pan Shiyi sell SOHO in China? Blackstone’s termination of the acquisition of SOHO China will affect the price of the latter’s assets?
Zheng Zhong, a commercial real estate analyst at the Shell Research Institute, pointed out that the eight monolithic properties owned by SOHO Group are relatively scarce, and while ensuring the current high occupancy rate, they can still attract the attention of institutional investors. If the price is right, they may be sold individually in the future in order to get the money back quickly. Lu Bingquan also said that the possibility that SOHO China will sell existing projects separately is not ruled out.
However, in Chen Yunfeng’s view, it is estimated that SOHO China will not be sold in bulk, because SOHO China has transformed from the original bulk sale to the current overall holding business model.
In terms of asset value, Zhu Lingbo said that whether SOHO China’s projects maintain value or increase value depends on the specific operating conditions. Other factors such as brand will also have a certain impact, but it mainly lies in the income, quality, and future operating conditions of the assets. .
Beijing News reporter Zhang Xiaolan