US private equity firm Carlyle Group will pay 1.217 billion yuan
(US$154 million) for a 40.32 percent stake in Xugong Construction
Machinery Co, according to a statement from Xugong's
Shenzhen-listed unit Xugong Technology yesterday.
Carlyle will channel an additional 584 million yuan (US$73.92
million) into Xugong to raise its stake to 50 percent under the
deal signed on Monday, said the statement.
This is the second major concession Carlyle has made in the
Xugong deal after it agreed earlier this month to cut its stake to
50 percent.
Last October the US firm agreed to buy 85 percent of Xugong for
US$375 million, the biggest foreign acquisition of a controlling
stake in a leading State-owned company in China.
The deal was submitted to the Ministry of Commerce for approval
last year, but was turned down amid concern that foreign control of
key Chinese firms could threaten the country's economic
security.
Analysts said industry leader Xugong owns advanced technologies
and that the sale of a number of such companies to foreign firms
may result in China losing its technology to foreign
competitors.
They also said that China was selling its strategic companies to
foreign investors too cheaply.
The Xugong deal has drawn attention to other acquisitions such
as the proposed takeover of the Luoyang Bearing Corporation, a
leading bearing producer in China, by Germany-based Schaeffler
Group.
The Ministry of Commerce and other authorities issued new rules
in August concerning the acquisition and takeover of Chinese
enterprises by foreign investors.
(China Daily October 25, 2006)