No Soho deal bodes ill for the rich

Blackstone or BlackRock?

One may be forgiven for getting confused because the names really look alike, although they are different companies.

When Blackstone was reported to have abandoned a US$3 billion (HK$23.4 billion) bid to acquire a controlling stake in Soho China, some wrongly related it to BlackRock.

The two companies are similar in many aspects – not only in the name, with one referencing a stone, the other a rock, but also because both are specialists in asset management with global business exposure, including in China.

However, as inferred by the names, Blackstone is smaller – but that is all relative.

According to its official website, a total of US$685 billion worth of assets is currently under its management – including about US$200 billion in real estate.

But a rock is normally bigger than a stone and, in its report for the second quarter, assets under BlackRock’s management climbed to a high of US$9.49 trillion.

In this sense, BlackRock is truly a colossal Goliath.

That said, Hongkongers may feel sentimental for Blackstone as former financial secretary Antony Leung Kam-chung became its Asia head after stepping down from public office amid controversy over his new-vehicle tax proposal.

It was back in June when Blackstone surprised the markets with an offer to buy Soho China from its chairman Pan Shiyi and chief executive Zhang Xin for US$3 billion.

Mainland authorities subsequently started an anti-trust investigation into the deal, instantly casting uncertainty over the transaction.

Last week’s announcement meant husband and wife Pan and Zhang’s attempt to sell their interest in Soho China – which owns 1.3 million square meters of mostly iconic commercial properties mainly in Beijing and Shanghai – failed once again.

According to Reuters, Blackstone had also been in talks with the couple in 2020 to acquire Soho China for US$4 billion, but they couldn’t agree on the price. The political and business environment has since continued to change, with a state-led crackdown on various economic sectors, including property.

In June this year, the couple agreed to sell their stakes to Blackstone for US$3 billion – US$1 billion less than Blackstone had offered a year ago.

But the deal has faltered again, though not due to disagreement over the price.

If anything, the couple’s plan to shift their focus overseas has been dealt a fresh blow and Blackstone’s plan to expand its Chinese portfolio has also suffered a setback.

On an entirely different note, BlackRock’s ride in the mainland has been largely incident-free despite escalating conflicts between China and the US.

US billionaire George Soros’ recent condemnation of BlackRock’s increased exposure in China as a tragic mistake not only drew criticism from Beijing likening him to a terrorist in the economy but also a rebuttal from BlackRock.

BlackRock was the first foreign-owned company permitted to run wholly owned business in the mainland’s mutual fund industry. Ignoring growing anti-China rhetoric in Washington, BlackRock recently launched its first fund in China after raising 6.68 billion yuan (HK$8.06 billion) from 111,000 investors.

Would Pan and Zhang stand a better chance if it was the rock offering to buy Soho China?

Maksim Chau

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