Carlyle eyes first Chinese LBO

US private equity fund the Carlyle Group may be about to become the first firm to undertake a leveraged buyout in mainland China, according to a report.

Global buyout firm the Carlyle Group is reported to be the front-runner to acquire a stake of up to 80 percent in Chinese company Xuzhou Construction Machinery Group, for a price expected to be between $300 million and $400 million (€397 – €530 million), according to a report in the Wall Street Journal.

If successful the transaction, which is expected to close by mid-2005, would be the first LBO of a Chinese firm by a foreign private equity firm.
Such a deal would represent a departure from private equity firms' usual practice of taking only minority stakes in Chinese companies using their own capital.

The report said that finance could remain a sticking point, due to both the complexity of China's regulatory structure and the limited amounts of Chinese currency to which foreign banks have access.
Xuzhou, based in Jiangsu province near Shanghai, makes construction equipment for roads, mines, and buildings. The report suggested it is on course to make sales of nearly $3 billion this year.

Earlier this month, pan-Asian private equity firm Newbridge Capital, owned by Texas Pacific Group and Blum Capital Partners hired Timothy Dattels as a managing director and John Olds as a senior advisor.