Carlyle drops controlling share in Chinese machine firm as new deal awaits approval

Carlyle Group, a private equity firm from the United States, has agreed to reduce its stake in Xugong Construction Machinery, a leading Chinese construction machinery manufacturer from 85 percent to 50 percent.

The state-owned Xugong Group will retain the remaining 50 percent stake, according to a new deal signed Monday, Xugong's Shenzhen-listed unit, Xugong Technology (000425), said in an announcement Wednesday.

The Carlyle deal was submitted to the Ministry of Commerce for approval in December last year, but was turned down amid rising concerns that foreign control over key Chinese firms could threaten the country's economic security.

Carlyle originally offered about 320 million U.S. dollars for an 85-percent stake in Xugong. A report in the Shanghai Securities News said Carlyle would pay slightly more per share under the new deal, but no details were given.

Carlyle also loses the board chairmanship to Xugong, but they will have equal representation on the board.

Under the old deal, Xugong would have had only two members on the board, compared to six from Carlyle.

The new deal has already been approved by the congress of employees as well as the governments of Xuzhou city and east China's Jiangsu Province, where the company is located. It would be submitted to central authorities for approval soon, the report said.

Source: Xinhua