Xugong Group Construction Machinery Co, China's biggest maker of construction equipment, has abandoned a plan to sell a stake to US investment firm Carlyle Group, both companies said in a joint statement today.
The two companies' investment agreement signed in October 2005 for a stake in Xugong has now expired. "Both parties have decided not to proceed with the investment and Xugong will embark independently on its restructuring," the statement said.
Carlyle agreed to buy 85 percent of China's State-owned Xugong for $375 million in October 2005. If the bid is approved, it will be the biggest foreign acquisition of a controlling stake in a leading State-owned company in China.
"The original goal of the partnership was to leverage Carlyle's global expertise and network to help Xugong expand globally and enhance its industry leadership," said the joint statement.
However, the deal was turned down by the Ministry of Commerce amid concern that foreign control of key Chinese firms could threaten the country's economic security.
Carlyle have invested in more than 30 companies in China and have put in more than $1.3 billion in equity alone in the past two years.