Carlyle, the US private equity group, has passed an important step in its controversial effort to acquire a stake in a Chinese construction equipment company after a key government agency gave its approval to the deal.
The State-owned Assets Supervision and Administration Commission (Sasac),the government body which controls state-owned companies, decided Carlylecould take a 50 per cent stake in Xugong Construction Machinery, a person familiar with the situation said.
However, although he said Carlyle was now confident of getting final confirmation, the company still needs the approval of the Ministry of Commerce and the stock market regulator beforethe deal can goahead.
Xugong also said that Sasac had given the green light for the deal.
Carlyle announced last October that it had agreedto pay $375m for an 85per cent stake in Xugong,a listed company whose parent group is controlled by the local governmentof Xuzhou city in Jiangsu province.
More than a year later, however, the deal has yetto win approval in Beijing and became caught up in a backlash over foreign investment in the Chinese economy at a time when the government has been selling minority stakes in large banks.
Rival construction group Sany Heavy Industry conducted a fierce campaign against the proposed take-over, including a heavily nationalist weblog pennedby the company’s chiefexecutive. In a bid to overcome political resistance, Carlyle and Xugong changed the terms of the dealin October to make it ajoint venture, with Carlyle taking a 50 per centstake in the Chinese company.
A person familiar with the situation said: "This dealhas cleared an important hurdle and everyone connected is hopeful that the remaining ministries will now grant approval in the next few weeks."
Sasac would not have approved the deal unless other departments in Beijing felt broadly comfortable with it, he said.