Carlyle reduces Xugong bid again
By Wan Zhihong (China Daily)Updated: 2007-03-20 13:28
US private equity firm Carlyle Group has again agreed to
cut its offer for Xugong Group Construction Machinery Co Ltd (Xugong), reducing
its stake from 50 to 45 percent in its second major concession.
Carlyle signed an agreement with Xugong to lower its proposed stake to 45 percent, Xugong said in a statement to the Shenzhen Stock Exchange yesterday.
Under the new agreement, Xugong would be 55-percent-owned by Xuzhou Construction Machinery Group (XCMG), which is owned by the Xuzhou local government. XCMG would have five seats on the board of the new entity, while Carlyle would have four, according to the statement.
It did not provide any financial details, and said the deal still needed approval from the central government. A Carlyle spokeswoman would not disclose any further details.
The revised agreement suggests regulators are keeping a tight grip on mergers and acquisitions, said an analyst who declined to be named.
"The Xugong deal is important to Carlyle as it may impact its other acquisitions in China," said Jenny Ma, vice-president of THTB Capital Ltd.
The deal reflects the government's attitude toward foreign access to key industrial assets, said Ma, who helped Royal Dutch Shell buy a 75-percent stake in China's largest privately owned lubricant oil company Tongyi last year.
In October 2005, Carlyle agreed to buy 85 percent of Xugong for $375 million. It would have been the biggest acquisition by a foreign investor of a controlling stake in a leading State-owned company in China.
The takeover bid has raised concern that China has been selling its strategic companies too cheaply to foreign investors, and has been in the hands of the central government for a long time.
Some analysts said China could lose its technology to foreign competitors if important firms like Xugong were sold to overseas companies.
They also said selling off a major firm like Xugong to a foreign company may hurt China's economic security.
Last August, the Ministry of Commerce and other authorities issued new rules on the acquisition of Chinese enterprises by foreign investors.
The new rules, which took effect on September 8, state that such acquisitions must be approved by central authorities in three cases: if the foreign bidder has a market share of more than 20 percent and annual sales in China of more than 1.5 billion yuan; if the market share of one of the parties to the deal reaches 25 percent after the acquisition; or if the foreign bidder has acquired more than 10 Chinese enterprises in one year.
Carlyle has already made a concession in its bid for Xugong, cutting its initial proposed stake from 85 to 50 percent.
The Chinese government is considering several other cases, such as the proposed $269 million purchase of part of Laiwu Steel Corp by Arcelor Mittal, the world's biggest steelmaker. Arcelor agreed last February to buy 38.41 percent of Laiwu, based in eastern Shandong Province.
(For more biz stories, please visit Industry Updates)
| ||