Carlyle cuts its stake to 50% in Xugong takeover bid
By Wan Zhihong (China Daily)
Updated: 2006-10-19 08:51
Earlier the State Council said key Chinese equipment makers should
be controlled by domestic interests.
"Big and important equipment
producers must seek opinion from relevant departments of the State Council if
they want to sell stakes to foreign investors," said the State Council
statement.
"China encourages restructuring of such companies on the basis
that the country has the controlling power."
Last October, Carlyle agreed
to buy 85 percent of Xugong for US$375 million, the biggest acquisition by a
foreign investor of a controlling stake in a leading State-owned company in
China.
The takeover has raised concern that China has been selling its
strategic companies too cheaply to foreign investors.
The deal has been
in the hands of the central government for a long time.
Earlier media
reports said that the government would not approve the deal unless Carlyle
pledged not to sell its majority stake to a foreign construction equipment group
in the future.
Analysts said that Xugong is a leader in the industry and
owns many advanced technologies, and that China may lose its technology to
foreign competitors if many companies like Xugong are sold to
foreigners.
They also said that selling off a major firm like Xugong to a
foreign company may hurt the whole construction machinery
industry.
Earlier in June, Chinese heavy machinery manufacturer Sany said
it aimed to pay 30 per cent more than Carlyle to buy Xugong, its larger
rival.
"The price that Carlyle Group agreed to pay for the purchase was
undervalued. We could pay 30 percent more or even higher," said Xiang Wenbo,
executive president of Sany Corp.
"We have been planning to buy Xugong for a
long time."
Xiang said it was not good for
China's machinery industry to sell a significant firm like Xugong to a foreign
company.
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