Wangjing SOHO in Beijing. Photo: VCG

The shares of SOHO China, one of the biggest real estate developers in China, tumbled on Monday, as US private equity firm Blackstone scrapped plans for a $3.05 billion takeover.

SOHO China plunged nearly 40 percent to as low as HK$2.10 ($0.27) before edging back to HK$2.30 at close of trading. Its market value evaporated by approximately $830 million. This follows progress in satisfying the pre-conditions of the offer is insufficient, SOHO China said in a file to the Hong Kong exchange dated Friday. The parties involved agreed the offer should not be made.

In June, Blackstone offered to purchase SOHO China for around HK$23.7 billion ($3.05 billion), as the company hopes to expand its footprint in China with confidence in the country's long-term potential and economic recovery.

On August 6, SOHO China said that the State Administration for Market Regulation (SAMR) has begun reviewing the case under China's Anti-Monopoly Law. The review by the anti-trust regulator is one of the pre-conditions that have to be met for the deal to be completed.

Song Ding, a research fellow at the Shenzhen-based China Development Institute, told the Global Times on Monday that Blackstone abandoned acquisition of SOHO China mainly due to an anti-trust review. "The abrupt move of selling such big assets to a foreign entity itself is of sensitivity, as the country has strict policies restricting capital outflows," he said.

Founded in 1995, SOHO China is one of the biggest real estate developers in China, with around 1.3 million square meters of commercial property across the country. Its portfolio of premium mixed-used assets is concentrated in Beijing and Shanghai. One is a newly Zaha Hadid-designed office tower in Lize, a new office submarket in Beijing.

At its peak in 2010, the company reached total sales of 23.8 billion yuan ($3.69 billion) but by 2012 sales plunged to 9.468 billion yuan. Its market valuation has also been falling since its peak of around HK$60 billion. 

SOHO China's largest shareholders Pan Shiyi and his wife Zhang Xin have been selling the company's assets in China since 2014, while they did not purchase any new assets using sale proceeds, according to domestic news outlet thepaper.cn. Public data showed that SOHO China has sold assets worth 35 billion yuan since then, the report said.

As for the future of SOHO China, Song said that it is difficult for Pan and his wife to find other buyers right now and may probably continue to hold SOHO China. "If Pan and his wife's eventual goal is to transferring money overseas, they may not sell properties one by one to small domestic purchasers," he said.

Global Times