Controversies

Carlyle’s Xugong Acquisition Sparks Controversy Over Cheap Sale of State Assets

In 2005, the US Carlyle Group planned to acquire an 85% stake in Xugong Machinery for US$375 million. Xiang Wenbo, president of Sany Heavy Industry, and others publicly questioned the low acquisition price, alleging a cheap sale of state assets and a threat to industrial security, triggering a nationwide debate. Media also investigated and found that the original shareholder background of Xugong’s restructuring financial adviser was questionable. The Ministry of Commerce reviewed the deal multiple times; after several revisions, the acquisition ratio was reduced to 45% and later to below 50%, and in July 2008 the transaction was finally declared expired and invalid. The merger was not completed and became a landmark case in the review of foreign acquisitions of Chinese leading enterprises; then chairman Wang Min said he “directed Xugong’s restructuring.”