Beijing Conducting Probe Into Blackstone’s $3 Billion Bid on Chinese Real Estate Developer

American investment management company Blackstone is under antitrust investigation over its deal with SOHO China, one of China’s largest real estate developers. The investigation may take six months to be carried out.

If the deal is approved, Blackstone will pay over $3 billion to its Chinese partner, making it the New York-headquartered company’s biggest bet on China’s commercial real estate market.

The deal was first announced in June, which helped boost SOHO China’s stock price dramatically from 2.45 Hong Kong Dollars ($0.31) on June 3 to 4.6 HK Dollars ($0.59) on June 17, an increase of nearly 88 percent.

But since July 22, amid rumors that the Beijing authorities might investigate the deal, SOHO China’s stock price dropped from 4.12 HK Dollars ($0.53) to 3.22 HK Dollars ($0.41) on Friday, the last trading day, meaning around 22 percent of its market capitalization evaporated.

“In the current situation in which the deal has high uncertainty, any news can easily lead to panic in the market,” Dennis Huang Lichong, CEO of Wilson Capital International, told state-run 21st Century Business Herald on Saturday.

Wei Shilin, deputy director of the Professional Committee of Competition Law at Beijing Intellectual Property Law Association, told Chinese media The Economic Observer on Saturday that he believed that the deal can pass the antitrust investigation, but might need another investigation focussing on national security concerns.

“Some of SOHO China’s properties are located at sensitive places,” Wei said. “The national security department may review the deal [for potential risks].”

SOHO China owns and operates 20 real estate projects in China. All are located in busy neighborhoods in Beijing and Shanghai.

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(L-R), Steve Schwarzman, CEO and co-founder of the Blackstone Group, France Cordova, director of the National Science Foundation, and Steve Mollenkopf, CEO of Qualcomm Inc. participate in a roundtable discussion on a CEO Innovation Summit in Washington, on Dec. 6, 2018. (Mark Wilson/Getty Images)

Antitrust Investigation

SOHO China announced on Friday evening that Blackstone received a notification on Aug. 3 from the State Administration for Market Supervision (SAMS) that the regime had begun an antitrust investigation into deal. The SAMS is a ministerial-level agency in charge of regulating areas such as market competition, monopolies, intellectual property, and drug safety.

Back on June 16, SOHO China announced that Blackstone would acquire a controlling stake in SOHO China with an offer of 5 HK Dollars ($0.64) for each share—a 31.6 percent premium on the latter’s last closing price on June 15. SOHO China is listed on the Hong Kong Stock Exchange.

SOHO China announced that the total amount of the deal would be nearly 23.66 billion HK Dollars (around $3 billion). And SOHO China’s chairman Pan Shiyi and his wife, SOHO China CEO Zhang Xin, would keep a 9 percent stake in the firm after the deal.

In general, the Chinese regime needs 180 days to go through an antitrust investigation. If the deal is approved, Blackstone will be the company’s controlling party, and Pan-Zhang will be the second largest shareholder.

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The Wangjing SOHO development, designed by the late Iraqi-British architect Zaha Hadid, is seen as pedestrians walk across a zebra crossing in Beijing, China, on April 13, 2019. (Nicolas Asfouri/AFP via Getty Images)

SOHO China, founded in 1995, owns and operates commercial properties in the biggest business districts of Beijing and Shanghai.

Blackstone is one of the largest property owners in the world. Its real estate business was founded in 1991 and has $196 billion of investor capital under management.

From The Epoch Times