Blackstone 2 – Carlyle -1 (Updated)

Saturday, July 7, 2007 2:07

Watching the big PE firms in China work out their strategies for the last year has been entertaining to say the least.

Carlyle

Carlyle started off the China nationalistic debate when their deal with XMCG stirred up Chinese executives to the point where XMCG’s said he would pay more than Carlyle, then the deal was put into a holding pattern, then Carlyle brought out their big guns to close the deal, then they adjusted the deal to a minority stake, further reduced.. and the current status can only be described as on the back burner. (-1 point.. at a minimum)In the meantime, they lost the Chongqing Commercial Bank deal (-1 point) even thought their partner got approval, and now it has been announced that they missed their chance with Shandong Haihua as the JV deadline has passed.

According to a Reuters article:

The government owner of Haihua has been in talks with Carlyle since they signed a preliminary joint venture deal a month ago, but little progress has been made, Haihua’s listed unit said in a statement to the Shenzhen Stock Exchange.

“We have no idea why the government and Carlyle didn’t reach an agreement,” Wu Bingshun, board secretary of listed Haihua, told Reuters.

again, -1 point at a minimum, as Carlyle fails again to seal the deal, and while I believe all deals should be negotiated on their own terms, Carlyle needs to close a deal.. Perhaps they are suffering a phobia, but I am guessing that we will see a management restructuring soon.

Blackstone

On the flip Side, Blackstone has not only brought in an investment of 3 billion USD from the Chinese government (+1 point at a minimum) ,but they have obviously wasted no time in leveraging that success as they announced that they are in talks with China National Bluestar Corporation.. a State-owned chemical firm (+1 point).

What makes the Blackstone story so interesting is just how quickly the deals have happened, and how quietly. Carlyle obviously has cleared a lot of land mines by stepping on them ,and I am sure Blackstone is most appreciative of that.

Anyone have a different read on this? Please share your thoughts

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4 Responses to “Blackstone 2 – Carlyle -1 (Updated)”

  1. University Update - Yahoo - Blackstone 2 - Carlyle -3 says:

    July 7th, 2007 at 4:14 am

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  2. China Law Blog says:

    July 7th, 2007 at 6:43 pm

    I saw a lead guy from TV from Carlyle maybe a month ago and that guy’s understanding of China was A+. It’s just the second inning in China where Carlyle is concerned.

  3. Rich says:

    July 7th, 2007 at 10:05 pm

    CLB,

    It is not about intelligence or understanding China.. it is about execution.

    The team in Mr. China were intelligent and had an A+ understanding of China as well, but again.. poor execution.

    I think there are a few reasons why Carlyle is having such a tough time, the most important being they are pushing the wrong deals, and pushing in the wrong manner.

    Perhaps if they took a small deal or one that was the Chinese counterpart to one of their other holdings, they would have a better chance, but going for China’s crown jewel in the contruction equipment industry when they clearly have no value to add is the wrong approach… especially when the valuation was well below what XMCG could have received in the market.

  4. Rich says:

    July 11th, 2007 at 7:50 am

    Just a quick FYI to say that I have ammended the score to Blackstone 2 – Carlyle -1 as I in reading more about Carlyle in China, I realized that I failed to mention that they had closed successfully on two deals prior to their recent difficulties.

    Those deals not withstanding, I still believe that their recent difficulties stem not fom a lack of nationalism but from poor targeting and valuation.

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