Washington D.C.-based Carlyle Group has been selected
as preferred bidder to take a controlling stake in China's largest
construction machinery developer, Xuzhou Construction Machinery
Group Co. Ltd. for a reported price of as much as $400 million.
But XCMG, as the central China-based company is known, said a
deal still requires clearance from its 100% owner, the Xuzhou city
government.
"The city government is negotiating the final terms but we don't
know whether it would approve it," said a company spokesman, who
wouldn't comment on the likely sale price.
Another source noted that talks are "at a very early stage."
The city government wants to sell its stakes in 72 state-owned
enterprises, including XCMG. Like nearby Shanghai and Beijing, it is
attempting to reform lumbering state enterprises and lure foreign
investment.
Carlyle beat out eight preliminary bidders for XCMG, including
XCMG's joint venture partner, Peoria, Ill.-based Caterpillar
Inc.; the private equity arms of both J.P. Morgan Chase &
Co. and Citigroup Inc.; Warburg Pincus LLC; and
American International Group Inc., all of New York. All eight
initial bidders were from the U.S., the XCMG official said.
The auction is being conducted by New York-based J.P. Morgan
Chase & Co. Deutsche Bank AG, which is based in Frankurt,
is advising Carlyle.
XCMG, founded in 1989, has 26 affiliates, including one listed on
the Shenzhen Stock Exchange. It has 13 joint ventures with foreign
investors, including Caterpillar. It has also expanded overseas,
mainly to developing markets in Southeast Asia, the Middle East and
Africa. It recorded revenue of 11.2 billion renminbi ($1.35 billion)
in the first six months of the year, up 60% from same period last
year. In 2003, it made Rmb15.4 billion in revenue, up from Rmb9.3
billion a year earlier.
The bid from Carlyle reflects the private equity group's stated
ambition to assume control of big Chinese state-owned enterprises.
The firm is also apparently exploring its options in South Korea.
The world's fifth-largest shipping group, Hanjin Shipping Co.
Ltd., confirmed reports Thursday it has had contact with
Carlyle. But spokesman Man Young Hur said only that "a working-level
group" talked to Carlyle about terminal efficiency and that no
merger or joint venture was imminent.
Carlyle officials in South Korea were unavailable for comment,
while later Thursday Reuters cited an Internet news site e-daily
quoting Cho Yang-ho, chairman of the shipping group's de facto
parent company, Korean Air, saying that the talks had ended.
� Jennifer Veale in Seoul contributed to this
report
