CHINESE chemical maker Shandong Haihua Group (stock code: 000822) has failed to reach an agreement with Carlyle Group on a proposed venture before the July 5 deadline, its listed unit said yesterday.
This becomes another setback in China for the United States buyout firm, which had been turned down for a stake in a bank and has been waiting for the state nod to buy part of a machinery maker since October, 2005.
Haihua Group on June 6 signed an initial deal with Carlyle to form a majority-owned joint venture, into which it will inject assets including its 49 percent stake in the listed arm, as part of effort to bring in strategic investors.
The deal was effective within one month until Thursday.
In a statement to the Shenzhen Stock Exchange, Shandong Haihua Co said the local state-asset regulator, its parent and Carlyle did not make any substantial progress on the proposal before the deadline.
Price barrier
Haihua shares yesterday settled 1.28 percent lower to close at 12.38 yuan (US$1.63), after tumbling as much as 10 percent in early trade.
"There are big uncertainties over whether the cooperation with Carlyle can be successful," the statement said. It didn't specify the reason, but some analysts say the disagreement could be on the pricing of the listed unit.
"What Carlyle is eying is Haihua Group's stake in the listed Haihua and its soda ash assets," said Hu Huanlu, an analyst at TX Investment Consulting Co. "So the problem could be a disagreement in the price of these assets."
Haihua is China's leading maker of soda ash, a costly material that is combined with sand to make glass.
Carlyle would not comment and the local state asset officials in Weifang, Shandong, where Haihua is based, were not available.
Should the deal be clinched, the controlling shareholder of listed Haihua will be changed while the ultimate parent will still be Haihua Group. A Haihua official said they will keep seeking potential investors.
Carlyle failed to buy a 7.99 percent in Chongqing City Commercial Bank and is still waiting government approval to invest in Xugong Group Construction Machinery Co, although it has finalized investments in several other Chinese firms, including an insurer and a steel-tube maker.