Governments enter Xugong wrangle

Ministers from the US and China have become involved in the long running proposed takeover of Xugong Construction Machinery by US private equity firm Carlyle Group, reported the Financial Times in the UK.

Senior Chinese government offICials met to decide whether or not to approve the takeover during a three-day meeting involving offICials from six departments, including the Ministry of Commerce and the China Securities Regulatory Commission. Shareholders, competitors, suppliers and customers of Xugong were invited to speak, but representatives of Carlyle were not invited.

During a visit to China in the last week of July, US Undersecretary of Commerce, Frank Lavin, urged the Chinese government to approve the Carlyle deal. The Chinese government faces intense domestic pressure to block foreign investment in a number of industries that the authorities there deem to be strategIC.

In October 2005, Carlyle agreed to pay US$375 million for 85% of Xugong but, at the time of writing in August 2006, the Ministry of Commerce was yet to approve and finalise the deal. In June Xiang Wenbo, chief executive of Sany Corp, denounced the proposed takeover on nationalist grounds and said his company would make a higher bid for Xugong. Following Xiang Wenbo's comments, Chinese authorities announced that large makers of equipment must consult them before selling stakes to overseas investors.