CARLYLE BACKS DOWN ON XUGONG作者：Sundeep | 原始出处：ftchinese | 2007-3-19 15:06:21 | 已阅 2851 次

By Sundeep Tucker in Hong Kong
Monday, March 19, 2007
 
Carlyle, the US buy-out group, bowed to Chinese political pressure and agreed to acquire a minority stake in China's biggest construction machinery maker.

It was announced at the weekend that Carlyle had signed an agreement to acquire 45 per cent of Xugong Construction Machinery, confirming a report in the Financial Times last week.

The development follows a saga that began in October 2005, when Carlyle agreed to pay $375m for an 85 per cent stake in Xugong, whose parent is controlled by the local government of Xuzhou city, after a year-long public auction. But the deal was caught up in a backlash over foreign investment and the merits of private equity investment. It became a benchmark of Beijing's attitude towards open access to key industrial assets.

Carlyle tried to restructure the deal in October as a 50-50 joint venture, paying about $230m, but Beijing rejected this because of the sector's “strategic importance”.

It was argued that Xugong, the industry leader, owned advanced technologies and the sale of such companies to foreigners could result in China losing its technology to overseas rivals. The Chinese company said, in a weekend statement to the Shenzhen stock exchange by a listed Xugong subsidiary, that Carlyle had signed a “revised agreement” to create a 55:45 joint venture. Carlyle will supply four of the nine board directors of the new company, with the remaining five and the president nominated by Xugong.

The statement did not disclose financial terms, but added the agreement was “pending approval or endorsement from relative government departments”.

Carlyle declined to comment yesterday. However, people familiar with the situation said both sides were confident they had done enough to secure approval.

One person said: “Everyone involved has been bruised by this saga. This deal has turned from a buy-out to a minority stake, and I can't think what else is left for regulators to complain about.”

http://www.ftchinese.com/sc/story.jsp?id=001010146&pos=MAIN_NEWS&pa1=2&loc=HOMEPAGE