Blackstone Closes 3bn USD Deal with China.

Sunday, May 20, 2007 21:03
Posted in category The Big Picture

Following today’s announcement by the Blackstone Group, one can only be left to wonder what happened to Carlyle?

Today’s announcement that China (the Country) would invest 3 billion USD into Blackstone in return for a minority stake of non-voting shares is significant to say the least.

In one regard, it means that China’s outflows to the U.S. have increased to 7.3 billion USD for the month.. thus alleviating some pressure on the trade gap… and in another, it means that China is tired of collecting the coupons off of U.S. treasuries..

What is interesting about the deal is that, this will rank ahead of Lenovo and Haier’s investments to be the single biggest investment in the U.S…. and it happened quick (as reported by the WSJ in its article China Puts Cash To Work in Deal With Blackstone):

The agreement came together in just three weeks — so quickly the Chinese had to establish a special unit to deal with the Blackstone stake, since the state investment company being formed to manage the reserves doesn’t formally exist and there was no entity to make the investment.

The first conversations came in April when Antony Leung, chairman of Blackstone’s Asian office in Hong Kong, called on Lou Jiwei, head of the state investment company’s working group, and two of his senior deputies in Beijing, including Jesse Wang.

Prior to the final details being released, I will be interested to see if more details come out… particularly surrounding the structure of the deal. Of most importance for me is where the money will go first. Blackstone U.S. or Blackstone H.K. (after all, that will impact the trade numbers). Second, is the money open usage, or are their stipulations.

it goes without saying that Blackstone group will now find investing in China easier… unlike Carlyle… and may gain access to better deals.. and more importantly have better support when cutting the deal (this 3 billion will bring more than just a gold key introduction service).

For Carlyle, I cannot think of a worse headline. their deals have stalled even after bringing in the big guns, reducing their stake, and agreeing to pay more for the reduce stake on a percentage basis. They played hardball.. and it looks like it cost them on several deals. Maybe it is time to bring in a free agent or bring someone up from the minors to reinvigorate the team. I am sure the folks at LaFarge will be happy to give them a few pointers….

If nothing else… I think this investment shows that China is betting on Donkey for 2008

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