The State Investment Company, a State foreign exchange investment company
soon to be established in China and The Blackstone Group LP announced today that
the State Investment Company has agreed to make a US$3 billion investment in
Blackstone in the form of non-voting common units.
The deal is in an effort to diversify its US$1.2 trillion in foreign-exchange
reserves beyond United States Treasury bills and into commercial enterprises.
The deal, which is set to coincide with Blackstone's US$4 billion initial
public offering (IPO) this year, will give China a roughly eight percent stake
in Blackstone, which owns companies that have 375,000 employees and US$83
billion in annual sales.
It would also represent a watershed for the booming private equity industry
as it tries to gain a foothold in China.
The purchase price per common unit will be 95.5 percent of the public
offering price in Blackstone's planned IPO. The number of non-voting common
units purchased by the State Investment Company will be reduced if necessary so
that the State Investment Company's equity interest in Blackstone immediately
following the planned initial public offering remains under 10 percent.
The State Investment Company has agreed to hold its investment in Blackstone
for at least four years.
Lou Jiwei, head of the working group of the State Investment Company, said:
"We are very pleased to be able to make the State Investment Company's very
first investment in such a well-respected firm as Blackstone."
"It's a historic change. It's a paradigm shift in global capital flows,"
Stephen A. Schwarzman, chairman, chief executive officer and co-founder of
Blackstone, said in an interview. He called the Chinese government's decision
"huge" and even "surprising" to him.
"We are pleased to welcome the State Investment Company as an equity owner of
our firm. We are proud to be part of such a significant transaction for both of
our organizations," added the chairman.
China will invest in the Blackstone firm itself, not in its funds, which
invests in companies. However, the relationship opens the door for China to
invest in Blackstone's funds in the future. China has also promised not to
invest in a competing private equity firm for a year.
Blackstone has been moving aggressively in recent months to find investments
in China. Blackstone is trying to catch up to the Carlyle Group, which has a
large operation in China.
In January, Blackstone hired Anthony Leung, the former Hong Kong financial
secretary, to run the group's business in the Chinese mainland, Hong Kong and
Taiwan. And last month, Reuters reported that Blackstone was seeking to acquire
a stake in the Guofeng Group, one of China's largest makers of plastic products.
Blackstone is planning to open offices in Hong Kong and Beijing this
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