Mar. 11 (NBD) -- New York City-based private equity firm Blackstone Group Inc. (NYSE: BX) is in exclusive talks to take Hong Kong-listed property company SOHO China Ltd. (00410.HK) private in a 4 billion U.S. dollars deal, Reuters reported Tuesday citing two sources with direct knowledge of the matter. 

Trading in the target's shares has been suspended as of 11:12 am of Tuesday. Before that, SOHO China's shares rocketed 37.58 percent to HKD 4.10 (0.53 U.S. dollars) after reaching a 21-month high of HKD 4.17. The reported privatization talks also gave Blackstone's stock a fillip which closed 7.8 percent higher at 50.64 U.S. dollars.

Blackstone has declined to comment on the report. 

National Business Daily noticed that in a regulatory filing on Wednesday, SOHO China confirmed it has been in discussions with overseas financial investors to explore the possibility of a strategic partnership. But as of the date of the announcement, no decision has been made on whether to proceed with the potential transaction, and no definitive agreement has been entered into with any party to implement the potential transaction. 

Photo/Zhang Xiaoqing (NBD)

This marked the second time that SOHO China saw a surge in its share prices in half a year. The last time was October 30, 2019, when reports by media outlet Caixin said that the Hong Kong-listed company was considering selling a majority of its commercial property holdings in deals that may fetch as much as 8 billion U.S. dollars and the buyers were reported to be Blackstone and Singapore sovereign wealth fund GIC Private Ltd. The news pushed up SOHO China's shares by 17.9 percent on the day and by 10.82 percent the next trading day.

With more reports concerning SOHO China's property sale coming in, speculation increased that the company might go private. From 2014 to September 2019, the company cashed out about 29.3 billion yuan from assets stripping in China. According to the interim report for 2019, the value of its investment assets was 8.78 billion U.S. dollars and its debt stood at 32.68 billion yuan as of the end of June 2019.  

Evidence shows that there is a growing trend towards privatization in the Hong Kong stock market in the past year and the number of companies which will seek for privatization in both Hong Kong and U.S. stock market will skyrocket this year, according to media outlet Securities Times citing industry insiders. Last year, 10 Hong Kong-listed companies completed their privatization plans, according to the media outlet's incomplete statistics. 

On February 28, 2020, China's largest nuclear power operator CGN New Energy Holdings Co., Ltd. (01811.HK) announced that its indirect controlling shareholder China General Nuclear Power Corporation is considering to privatise the listed company.

"About 80 percent of the capital in the Hong Kong stock market flow into high-growth stocks representing only 20 percent of the total, and many listed companies have found it difficult to continue raising money. This mostly explains why some Hong Kong-listed companies chose to go private. Additionally, companies are usually undervalued in the bourse than in the Chinese A-shares market so some of them would file for an IPO in mainland China after the privatization," Tong Tao, board director of Investment Banking Department at Huatai Securities, analysed to Securities Times.

Email: lansuying@nbd.com.cn