China's Xugong Group (徐工集團), one of the country's biggest makers of construction machinery, said it had abandoned a controversial plan to sell a stake to US-based Carlyle Group.
Stake sale agreements signed with Carlyle over the past three years have expired, Xuzhou Construction Machinery Science and Technology Co (徐州工程機械科技), a listed unit of Xugong Group, said in a statement to the Shenzhen Stock Exchange late on Tuesday.
The announcement ended on again, off again negotiations over a deal widely seen as a litmus test for China’s attitude towards foreign investment.
Xugong “does not intend to continue efforts to carry out equity cooperation with Carlyle,” the statement said.
Under agreements signed in October 2005, Carlyle originally sought to pay US$375 million for a controlling 85 percent stake in Xugong.
But the deal triggered a backlash against foreign takeovers in Chinese companies in a key industry and was criticized by officials who feared state assets were being sold to foreigners at a too low price.
Carlyle has subsequently cut its target stake in Xugong twice, eventually seeking just 45 percent for 1.8 billion yuan (US$260 million).
However, the deal still failed to obtain approval from the Chinese government.
Separately, Xuzhou Construction Machinery estimated in a statement that its net profit for the first half of the year fell to only 300,000 yuan from 20.21 million yuan a year earlier, mainly due to surging raw material prices.
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