Blackstone Group (BX) , the world’s largest private-equity investor, has quietly dropped a bid to buy the Beijing-based office developer Soho China (SOHOF) , unable to win the necessary approvals from Chinese regulators.
Beijing’s onslaught against Big Tech, meanwhile, only intensifies. Regulators on that front reportedly want Alipay, the electronic payments app in the Alibaba Group Holdings (BABA) stable, to carve out its loan business into a separate entity that would answer to government shareholders.
A series of regulatory decisions has wiped billions off the market values of a lengthening list of Chinese businesses, which inevitably do not have state-owned status. It is a fraught time to run a private-sector company in China, and equally fraught to own shares in one.
On Monday, shares in Soho China (HK:0410) fell off a cliff in Hong Kong trade. They ended down 34.6% for the day, surrendering all the ground they gained in June when Blackstone inked a deal to pay HK$5 per share, for a total of US$3 billion, for its portfolio of nine office properties in Shanghai and Beijing.
They were trading at HK$2.51 before that deal was agreed, and descended back to HK$2.29 when the parties walked away. In a brief Hong Kong Stock Exchange statement, the companies said that “in light of the lack of sufficient progress” in satisfying the conditions of the deal, it will be scrapped.
The State Administration for Market Regulation, China’s monopolies watchdog, was supposed to be reviewing the deal. The companies had already been forced to delay the deal, and said in August and then again in September that they had provided more details to the regulator as part of an anti-monopolies review.
Sources “with knowledge of the deal” tell Reuters that the monopolies regulator did not want the deal to go through. Rather than officially blocking it, SAMR “just went silent.”
There’s no way Blackstone was going to end up with a monopoly on office property in China – that’s crazy. At last count, there were 99,544 property developers in China, according to Statista. Buying one of them, and a niche developer of upscale offices at that, is hardly going to corner the market.
So the only way to read it is that deals for Chinese companies to sell, well, any part of themselves to U.S. buyers are going to be blocked. An office developer does not have reams of sensitive customer data. A bricks-and-mortar business is the polar opposite of cutting-edge tech.
It is also an attack on China’s billionaire class. Soho China husband-and-wife founders Pan Shiyi and Zhang Xin are a flashy power couple who love the limelight. Chinese state broadcaster CCTV captured them in the crowd in New York on Saturday at the finals of the U.S. Open women’s singles, where Emma Raducanu, the Brit who has a Chinese mother and Romanian father, beat the Canadian Leylah Fernandez, who has Filipina-Canadian and Ecuadorian parents. Raducanu delivered a brief address in Mandarin to the…