"Both parties have decided not to proceed with the investment and Xugong will embark independently on its restructuring," Carlyle said in joint statement with the Chinese building machinery maker, without elaborating.
Carlyle was forced to abandon the purchase after its failure to gain approval from China's government for the transaction even after changing its bid three times and cutting the size of the stake.
But, Carlyle isn't completely taking no for an answer, "We believe that Xugong's expansion will create opportunities for partnership with both Carlyle and its portfolio companies worldwide," today's statement said.
Carlyle, said it has invested more than $1.3 billion in China during the past two years. It has stakes in 30 different Chinese companies.
China's government raised scrutiny of foreign buyouts after Carlyle signed an agreement to buy 85 percent of Xugong for $375 million, the first offer by a private-equity company for a major government-owned enterprise in China. A year later, the buy-out firm offered to cut the size of the planned purchase to 50 percent for about $230 million. The last offer, for 45 percent of Xugong, was made in March last year.
China's government in August 2006 decreed that overseas investors would need Ministry of Commerce clearance to buy controlling stakes in key industries, well-known trademarks or ``old Chinese brands.'' Deals can be vetoed or scaled back if they affect the ``security'' of China's economy.
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