Privately-held US firm Carlyle has agreed to again reduce its planned stake in Chinese machinery maker Xugong after it first cut the size of the purchase in October, state media reported Monday.
Carlyle's targeted stake in Xugong Construction Machinery will be cut down to 45 percent this time, leaving Xugong Construction Machinery Group retaining 55 percent of its current subsidiary, the China Securities Journal said.
The second reduction in Carlyle's planned purchase, which follows the investment company rising the price last October as well, is seen as a sign testing China's willingness to open its economy to foreign investment. In October 2005, Carlyle offered to buy 85 percent stake in Xugong Construction Machinery for 375 million dollars.
The deal was rejected by the Chinese government after fears were aroused over foreign control in a key Chinese industry. Carlyle was later forced to revise its plan and pay 228 million dollars for 50 percent of the company, with the price per share actually rising to 2.41 yuan (0.31 dollars) from the 2.01 yuan it agreed to pay one year ago. Now Xugong Construction's listed arm Xugong Science Technology Co Ltd has posted a statement announcing a second reduction in Carlyle's purchase.
According to the statement, Xugong Group will appoint a chairman and four directors to the board of directors of the joint venture, while Carlyle will have the right to appoint the other four directors including a vice chairman.