China's Xuzhou Group Dismisses Takeover Talk
Posted on June 15, 2006
China's Xuzhou Construction Machinery Group, which has agreed to sell a controlling stake in its biggest unit to U.S. private equity firm Carlyle Group, has dismissed the threat of a counter-bid by a domestic rival. Xiang Wenbo, executive president of heavy machinery maker Sany Corp., said that Sany aimed to take control of Xugong Group Construction Machinery Co. In October Carlyle agreed to pay $375 million for 85% of the unit.
Chinese regulators have so far not approved the Carlyle deal, amid concern among some officials that China is selling state firms to foreigners too cheaply. Xiang's statement raised the possibility that Sany, perhaps with official backing, could serve as a "national champion" to keep Xugong in Chinese hands.
But Wang Yansong, deputy general manager of Xuzhou, told the Securities Times that Sany was financially too weak to take over Xugong. "I have never had any personal contact with Xiang, and I have reservations about Sany's capability to take us over," Wang was quoted as saying. "His comments are irresponsible and his behavior is inappropriate."
Carlyle also dismissed Sany's challenge, saying it had a "definitive agreement" to buy the Xugong stake and remained committed to completing the deal. Xugong holds most of the assets of its parent Xuzhou, which is China's leading maker of machinery and had sales of $2.12 billion in 2005.