Where Will SOHO China Go After The Termination Of The Offer

On September 13, affected by Blackstone Group's termination of the acquisition, SOHO China's opening fell 40% to HK $2.1. As of the midday close, its share price fell 34.86% to HK $2.28/share, leading the decline in the Hong Kong real estate sector.

The relationship between SOHO China's return and stock price is like a function with strong amplitude. As the most effective variable, "acquisition and merger" drives up and down the curve in a short time.

Stock price ups and downs

After the close of business on September 10, SOHO China announced that, in view of the insufficient progress in meeting the preconditions for the takeover offer, all parties agreed that the preconditions could not be met on or before the final deadline of the offer, and Blackstone Group terminated the acquisition agreement of the company.

On the 13th, SOHO opened at HK $2.98/share in China. After the opening, the share price dropped sharply, with a minimum drop of 40% to HK $2.1/share.

In an investor exchange community, many shareholders lamented "how to get up and how to go down", and others pointed out that "it's not once or twice. Every big rise means selling, and a big drop means the other party doesn't buy it.".

If we spread out the K-line chart of SOHO China, we can find that the recent stock price changes are related to the rumors of merger and acquisition.

As early as March 10, 2020, there was news about Pan Shiyi's overall sale of SOHO China. It was reported that Blackstone Group was negotiating with SOHO China, with a transaction value of US $4 billion.

Affected by the news, SOHO China shares rose nearly 40% on the same day, with the highest price of HK $4.17 per share, a 52 week high.

SOHO China issued an announcement the next day, saying that it was indeed negotiating with overseas financial investors on the possibility of implementing strategic cooperation and had not yet made a decision on whether to conduct a potential transaction.

But the negotiation eventually ran aground. Five months later, on August 13, SOHO China officially announced that the discussion on potential transactions had been terminated because there was no consensus on the terms.

The share price of SOHO in China has since fallen all the way and bottomed out to HK $2 / share on September 25, 2020.

On November 13, 2020, it was reported that Hillhouse had held preliminary negotiations with SOHO China to privatize it, with a transaction valuation of more than $2 billion.

On the same day, SOHO shares in China rose more than 40% to HK $3.22.

However, the rumor of the second merger and acquisition was clarified quickly. On that day, Hillhead capital responded, saying that it had no intention to privatize SOHO in China. Subsequently, SOHO China's share price quickly narrowed to HK $2.45, down to 6.99%.

On June 16, 2021, SOHO China issued an announcement saying that Blackstone had issued a comprehensive tender offer with a purchase price of HK $5 / share and a maximum consideration of HK $23.658 billion. After the completion of the transaction, Blackstone will become the controlling shareholder and the largest shareholder of SOHO China. SOHO China will continue to be listed on the Hong Kong stock exchange. Pan Shiyi and Zhang Xin will retain 9% of the shares, and will withdraw from the board of directors after the completion of the acquisition offer. Blackstone Group will nominate a new executive director to the board of directors.

Highly related to this, SOHO China announced a temporary suspension of trading for this acquisition for six consecutive trading days. From June 4 to 11, its share price rose by 55.1%. On June 17 after the announcement, SOHO China's share price rose to HK $4.78/share. From June 4 to June 17, the cumulative increase was more than 90%.

This transaction, which had already been put on the table, was called "Pan Shiyi's last retreat", but it still failed.

In fact, as early as July 29, information about possible obstacles in SOHO China's acquisition case has flowed out. On the news surface, some media reported that the transaction sold by SOHO China to Blackstone Group was facing regulatory obstacles related to the founders. At one point in the day's trading, the share price plummeted by more than 30% to HK $2.9/share, closing down 19.89%.

Huang Lichong, President of Huisheng international financing, told the 21st century economic reporter that due to the market's expectation of a full-scale takeover offer, the stock price will trade around the purchase price (HK $5 / share), with a sharp rise. However, after the cancellation of the acquisition transaction, the share price should fall back to the original price.

"In the future, unless there is new big news, it will continue to be so," Huang said.

Where is the future

How will Pan Shiyi deal with SOHO China after the failure of the comprehensive acquisition offer with Blackstone Group? Will there be a new buyer coming?

As for the reasons for the termination of the offer, Bai Wenxi, IPG's chief economist in China, believes that: "The reason for the termination is mainly related to the anti-monopoly review, which has been fruitless, leading to Blackstone's tender offer for SOHO China beyond the time limit agreed by both parties. In essence, it is mainly due to the unclear attitude of the regulator, which leads to Blackstone's lack of confidence in the project prospect and abandons the acquisition. Otherwise, both parties can continue to extend the offer time."

Bai Wenxi told the 21st century economic report that the transaction between the two sides was not completed in the end, which will be a big negative for SOHO China and its actual controllers, Pan Shiyi and his wife.

Bo Wenxi is worried about the future of SOHO China. He believes that in the current state, it is very difficult for SOHO China to find a person to take over the offer. It is likely that SOHO can only continue to operate on its own or sell properties in bulk. There is no need for SOHO China to maintain its listing status, and delisting is also a matter of great probability.

"The listing platform is only useful for high turnover development enterprises that need continuous financing. SOHO China, a pure" charter company ", does not need continuous financing, but also has to waste all kinds of costs of maintaining the listing platform and bear the performance pressure of market investors. It is really not worth and cost-effective," Bai Wenxi said.

When Huang Lichong analyzed the future trend of SOHO in China, he said: "it is possible to sell a single property overseas to some other listing platforms, and then invest the funds in overseas real estate. It is also possible to distribute dividends and cash out some funds." he analyzed that the actions of Pan Shiyi and Zhang Xin family in recent years showed the determination to cash out, and continuing to reduce holdings is a high probability event.