China’s forex investment company to invest $3 bln in private equity giant Blackstone
Souce:Xinhua
China’s state foreign exchange investment company, which has yet to be fully established, has agreed to invest three billion U.S. dollars in the U.S. private equity firm the Blackstone Group, according to a joint news release.
Wang Jianxi, Chairman of the China Jianyin Investment Limited (China Jianyin), told Xinhua Monday that under an agreement signed on Sunday, the new state forex investment company will buy a non-voting stake worth less than 10 percent of Blackstone.
China Jianyin, a state-owned investment company, will be merged with the new state forex investment company.
According to the news release, the deal will be closed concurrently with Blackstone’s four billion U.S. dollars initial public offering (IPO) planned to be launched in mid June.
The Chinese investment company will buy the shares at 95.5 percent of the IPO price and hold them for at least four years.
“We are very pleased to make the state investment company’s very first investment in such a well-respected firm as Blackstone,” said Lou Jiwei, who is in charge of setting up the new investment company.
“We welcome the state investment company to be our stake holder and feel proud of being part of the very important transaction,” said Stephen A. Schwarzman, Chairman and CEO of Blackstone.
The deal is “purely commercial” and do not need the U.S. government approval as the stake is less than 10 percent, said Schwarzman.
The Chinese investment company will not affect the structure ofBlackstone as its stake is in non-voting shares, said Wang, adding the deal is a market-oriented decision made by the investment company with the goal of seeking higher earnings with acceptable risks.
As one of the core investors, the state forex investment company expects to gain profits from the private equity firm’s investment and rise in share prices, Wang said.
He noted the forex investment company, which is expected to go into operation this year, may also entrust its forex capital to other world leading asset management firms.
Chinese Premier Wen Jiabao said at a press conference following the closure of the annual session of China’s top legislature in March that the country will establish a foreign exchange investment company that will not be affiliated with any government department or institution.
The company, which will be subject to supervision, is charged with operating investments in line with state laws to preserve and increase the value of foreign exchange reserves, said Wen.
By the end of March, China’s foreign exchange reserves had jumped 37.36 percent from a year earlier to exceed 1.2 trillion U.S. dollars, which are mainly invested in low-yielding dollar bonds.
