Report: Carlyle To Limit Stake In Xugong

Posted on September 27, 2006

U.S. investment firm Carlyle Group will likely cut the size of the ownership share it is seeking in a major Chinese machinery maker in an effort to win Chinese government approval for the purchase, a source familiar with the situation told Reuters. Carlyle will probably limit its stake in Xugong Group Construction Machinery Co. to about 50%, instead of taking 85 percent as it initially planned, the source said.

China's biggest construction equipment maker, Xuzhou Construction Machinery Group (XCMG), agreed last October to sell 85%t of Xugong, its largest unit, to Carlyle for $375 million. But the Chinese government has not yet decided whether to approve the deal amid concern among some officials and academics that China may be selling control of industrial assets to foreigners too cheaply.

The Carlyle decision may be seen by foreign investors as a signal that China, while still eager to attract foreign money, is less willing to relinquish control of its key industrial assets.

XCMG declined to comment.