Carlyle to invest in Chinese chemical producer

The global private equity firm will invest $87m in Sinorgchem, China's largest producer of rubber antioxidant chemicals.

The Carlyle Group is investing $87 million (€55 million) in Sinorgchem, a Chinese manufacturer of para-phenylenediames (PPDs), a chemical additive used in the production of rubber products. No other financial details of the transaction were disclosed.

Established in 1999, Sinorgchem is China’s largest producer of rubber antioxidant chemicals. It has an annual capacity to produce 45,000 tons of PPD, making it the largest producer of the additive in China. It also supplies 4-aminodiphenylamine (4-ADPA), an intermediary product, to other PPD manufacturers in Asia. PPDs are used in the manufacture of rubber products to prevent them from ageing prematurely.

Yi Luo, managing director of Carlyle Asia Partners, said in a statement: “Sinorgchem is a high-growth company that has the opportunity to further expand its market position… We are confident that Sinorgchem’s overseas expansion will benefit from the operational expertise of our pool of senior chemical industry professionals.”

Liu Jing, chairwoman of Sinorgchem said the investment provides an opportunity for the company to “take advantage of the growing demand for our products both in China and abroad.”

The firm said consumption of rubber, and specifically tyres, is growing rapidly in China. The consumption is driven by the growing local automotive markets in the country and by the increasing relocation of tyre manufacturing facilities from overseas to China. The demand for PPDs rising, because it forms a major component in the manufacture of tyres.

Carlyle Asia Partners makes control or strategic minority investments in Asia ex-Japan. It has more than $2.5 billion in management in two funds and is currently raising a third targeting $2 billion, according to the Probitas Partners 2008 Private Equity Deskbook.

Separately, there is continued uncertainty over Carlyle’s proposed investment in Xugong, a Chinese manufacturer of machinery for the construction industry. The firm had originally offered $375 million for an 85 percent stake in the company in 2005 but the deal failed to secure the approval of regulatory authorities following a nationalist outcry over the prospect of the company’s ownership landing in foreign hands.

Carlyle subsequently decided to settle for a 45 percent minority stake last year but the deal still failed to get the go ahead from regulators. The UK newspaper Financial Times reported that the contract between Xugong and Carlyle has now lapsed, and will probably have to be renegotiated to get the necessary approvals. Carlyle, though, declined to comment on the status of the deal.