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Blackstone drops $3bn takeover of property developer Soho China

US private equity group backs out after Beijing antitrust review drags on

U.S. private equity group Blackstone abandoned its plans to buy property developer Soho China.   © Reuters

BEIJING/HONG KONG (Financial Times) -- Blackstone has scrapped its planned $3bn purchase of Chinese property developer Soho China, with Beijing's antitrust authorities yet to give a greenlight to the deal.

The US private equity group had made its offer conditional on approval by the country's competition authorities and in a joint statement on Friday, Blackstone and Soho China said they would not be able to receive antitrust approval in the agreed upon timeframe.

The HK$5 a share offer made in June valued the Chinese real estate group at HK$26bn (US$3.3bn) but came before Beijing expanded its regulatory clampdown on the technology sector to other industries.

News of the takeover this summer immediately caused consternation in China, with Soho China founders Pan Shiyi and wife Zhang Xin accused online of selling out and trying to flee the country with their money.

The couple were once high-profile entrepreneurial stars in China with their futuristic office towers twisting across the skylines of Beijing and Shanghai. They have adopted a lower profile and spent more time outside the country as China has become less hospitable to its capitalist class.

Their relatively liberal ideals, a $15m donation to Harvard University and moves to invest in US real estate, including a stake in the General Motors building in Manhattan, also led to criticism. Now the pair will have to figure out a new way forward for the property group they set up more than two decades ago.

Soho's portfolio of prime real estate in China's top cities had been set to be a centrepiece of Blackstone's expanding footprint in the country. Blackstone's co-founder Stephen Schwarzman has spent years wooing China's political elite, including pledging $100m to build a prestigious international education programme at Beijing's Tsinghua University that mints dozens of "Schwarzman Scholars" a year.

In recent years the US group has poured money into Chinese offices and residential property, as well as warehouses for ecommerce. Blackstone's logistics portfolio in China covers 53m square feet across 23 cities.

In January the company announced the $1.1bn acquisition of a vast urban logistics park in the so-called Greater Bay area, close to Guangzhou on the country's south coast. The deal expanded Blackstone's Chinese warehouse footprint by a third.

This year it completed the $1.1bn purchase of a 70 per cent stake in a logistics park in south China developed by Guangzhou R&F, a real estate developer that this week came under severe pressure in bond markets.

China's real estate market has been shaken over recent weeks by liquidity pressures on Evergrande, the real estate developer, with the problem spilling over to other developers including Guangzhou R&F.

The issues have related to leverage restrictions from Beijing on big Chinese developers that primarily specialise in residential real estate, as the government attempts to bring the property sector under tighter control.

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