IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

Arun has over 15 years’ experience covering the Technology sector. During this time, he has worked with technology start-ups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group and Clear Capital. He has a dual Master’s degree in Financial Engineering and Industrial and Operations Engineering from the University of Michigan. He obtained his Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Bombay. He is also a CFA charterholder.

IPOs and Catalysts/Events

SOHO China: After Many False Starts, Finally an Offer?

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Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

<p><a href="https://www.smartkarma.com/entities/soho-china-ltd" target="_blank" data-smartkarma-citation="entities:4123:1" rel="noopener">Soho China Ltd (410 HK)</a> is a real estate company controlled by power couple Pan Shiyi and Zhang Xin. Today, SOHO China has announced a pre-conditional voluntary conditional cash offer from <a href="https://www.smartkarma.com/entities/blackstone-group-inc" target="_blank" data-smartkarma-citation="entities:27166:1" rel="noopener">Blackstone Group (BX US)</a>. The offer of HK$5.00 in cash per share is a 31.6% premium over the closing price of HK$3.80 per share on the last trading day (11 June prior to the trading halt).</p><p>As a reminder on 15 June, SOHO China entered a trading halt pending the release of an announcement pursuant to the Hong Kong Code on Takeovers and Mergers which we discussed in <a href="https://www.smartkarma.com/insights/soho-china-after-many-false-starts-finally-an-offer" target="_blank" data-smartkarma-citation="insights:53114" rel="noopener">SOHO China: After Many False Starts, Finally an Offer?</a>. </p><p>The key pre-condition is approval by SAMR under the PRC anti-monopoly law, which we think should be forthcoming as this is not a privatisation bid. The offer is conditional on the offeror holding more than 50% of the voting rights. The offeror has secured irrevocables from Pan Shiyi and Zhang Xin representing 54.93% of the outstanding shares. Consequently, the offer has met the 50+% acceptance threshold. Pan Shiyi and Zhang Xin will retain shares representing 9.00% of the outstanding shares. Blackstone aims to maintain SOHO China’s listing. </p><div class="content-highlight"><p>Blackstone has driven a hard bargain and secured the irrecovables from Pan Shiyi and Zhang Xin at a relatively good price. Notably, Blackstone’s offer price of HK$5.00 per share is 17% below last year’s rumoured privatisation price of HK$6.00 per share. The lower price likely explains Blackstone’s move to pursue a conditional voluntary offer rather than privatisation via a scheme. While not a knockout offer, we think that the offer which has met the acceptance threshold, will also resonate with some shareholders. </p></div>

Soho China Ltd (410 HK) is a real estate company controlled by power couple Pan Shiyi and Zhang Xin. Today, SOHO China has announced a pre-conditional voluntary conditional cash offer from Blackstone Group (BX US). The offer of HK$5.00 in cash per share is a 31.6% premium over the closing price of HK$3.80 per share on the last trading day (11 June prior to the trading halt).As a reminder on 15 June, SOHO China entered a trading halt pending the release of an announcement pursuant to the Hong Kong Code on Takeovers and Mergers which we discussed in SOHO China: After Many False Starts, Finally an Offer?. The key pre-condition is approval by SAMR under the PRC anti-monopoly law, which we think should be forthcoming as this is not a privatisation bid. The offer is conditional on the offeror holding more than 50% of the voting rights. The offeror has secured irrevocables from Pan Shiyi and Zhang Xin representing 54.93% of the outstanding shares. Consequently, the offer has met the 50+% acceptance threshold. Pan Shiyi and Zhang Xin will retain shares representing 9.00% of the outstanding shares. Blackstone aims to maintain SOHO China’s listing. Blackstone has driven a hard bargain and secured the irrecovables from Pan Shiyi and Zhang Xin at a relatively good price. Notably, Blackstone’s offer price of HK$5.00 per share is 17% below last year’s rumoured privatisation price of HK$6.00 per share. The lower price likely explains Blackstone’s move to pursue a conditional voluntary offer rather than privatisation via a scheme. While not a knockout offer, we think that the offer which has met the acceptance threshold, will also resonate with some shareholders. 

Soho China

SOHO China: Blackstone Makes Its Offer