China's Xugong Machinery abandons plan to sell 45%

Tag : Construction Machinery

Xugong Construction Machinery Co Ltd hasabandoned plans to sell a 45 pct stake to the Carlyle Group afterwaiting as long as three years for approval from Chineseregulators, listed arm Xugong Science & Technology Co Ltd said.
The Chinese company said the agreement signed by the two sides hasexpired, and they have no plans to cooperate further on the matter.
Meanwhile, a spokesperson for Carlyle said that despite therejection, the company's strategy in China 'will not change.'
The failure of the deal has once again drawn attention to thepolitical challenges facing foreign investors in China, especiallyin so-called 'strategic' sectors.
'China is concentrating on its key strategic sectors and machineryis now a part of that,' said Tiger Tong, senior analyst with ChinaKnowledge in Singapore.
'Probably a few years ago if a foreign company wanted to buy intosuch assets it wouldn't have created much trouble, but lately Chinahas been trying to control them more,' he said.
It was almost three years ago when Carlyle first entered into anagreement with Xugong Construction, based in the mining city ofXuzhou in eastern China's Jiangsu province.
The US investor agreed to pay 375 mln usd for an 85 pct stake inthe Chinese company. However, amid growing concerns about foreigncompanies swallowing up substantial chunks of local industry,Carlyle was forced to cut its target stake to 50 pct in 2006 and to45 pct in 2007. Still, regulators refused to approve the deal.
Opposition also arose from Xugong's rivals. Shanghai-listed SanyHeavy Industry, based in Hunan province, said it would be unwise tosell off stakes in strategically important sectors like machinery.