Carlyle’s proposed US$375 million (RM1.38

Reported in The Business Time (4/8/06)  regarding Carlyle’s proposed US$375 million (RM1.38 billion) takeover of Xugong Group Construction Machinery Co.

The interesting part of this deal:

• it represents China’s first leveraged buyout;
• though, China receives about US$40 billion (RM147 billion) a year in foreign investment, the proposed foreign takeover of established companies is a relatively new phenomenon and has aroused nationalist opposition  and protectionist sentiment and
• a US trade officials and officials in Beijing were involved to resolve this proposed takeover deal.

A little bit of  basic detail:

• Carlyle bid’s of US$375 million (Rm1.38 billion ) is  for 85 per cent of Xugong followed a public, 12-month auction arranged by the government of Jiangsu province, where Xugong is located in the city of Xuzhou;
• Xugong is trying to develop an international brand name in a market dominated by giants like Caterpillar Inc and Japan’s Komatsu Ltd;

Apparently, the deal has caused such a hue-ha that officials in Beijing held an unprecedented high-level meeting to try to break this impasse. A three-day meeting last month was apparently held in Beijing which included Xugong shareholders, competitors, suppliers and customers, but Carlyle was not included.
A US trade official, Undersecretary of Commerce Franklin L. Lavin, visited Beijing last week and said Washington hoped that such decisions would be based on “business logic”.

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