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China buys $3bn Blackstone stake
BBC
Monday May 21, 2007
The Chinese government has agreed to pay $3bn (£1.5bn) for
a 10% stake in US private equity company Blackstone.
It will give Blackstone a head start in Chinese takeover deals and
allow China's government to tap into the global private equity boom.
The news, which is likely to create some political opposition in
the US, comes just days before Chinese Vice Premier Wu Yi visits
the United States.
China is buying the stake through its newly formed state investment
fund.
Share sale
Blackstone has also given details of its planned share sale.
The second largest US private equity firm plans to raise between
$3.87bn (£1.97bn) and $4.13bn (£2.10bn) in its initial
public offering later this year.
Shareholders will own a stake in the management company rather
than the portfolio of companies in which it has invested.
They will have only limited voting rights and no right to elect
the general partner or directors.
Blackstone will list on the New York Stock Exchange with the symbol
BX.
'Enhancing access'
Together with the investment from China, Blackstone could raise
up to $7.75bn.
"For both China and Blackstone, it's about enhancing access and
developing deeper relationships," said analyst Monte Brem, chief
executive of advisory firm Leucadia Capital Partners.
"The Chinese government wants to increase its access and role
in the global private equity market; Blackstone wants to increase
its access and role in China."
For Blackstone, the deal will bring an inevitable advantage when
investing in China, where foreign companies often struggle to gain
support from Beijing when trying to buy Chinese companies.
But the deal will raise eyebrows among some US politicians wary
of China's growing economic clout.
Political problems?
In 2005, China's plans to buy US energy giant Unocal fell through
in the face of political opposition in Washington.
The new fund will be trying to avoid any political problems with
its overseas investments, according to Jesse Wang, chairman of the
government-owned Jianyin Investment, which represented Beijing in
the deal with Blackstone.
"The fund is sizable and people may worry that it's from China
and a state investment vehicle," he said.
"I think they are going to have mostly commercial kinds of
investments, not involving sensitive investments."
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