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China Investment Corporation To Hike Stake in Blackstone via Open Mkt

17 October, 2008

Blackstone Group continues to enjoy confidence of Chinese sovereign wealth fund. China Investment Corp its stake in private equity firm Blackstone Group from 9.9 percent to 12.5 percent by purchasing shares on the open market, reports Thomson News quoting sources.

CIC bought its original stake in Blackstone just before the company’s $31-a-share initial public offering in June 2007, but has seen the value of its investment sink. Hammered by the subprime, Blackstone’s shares are currently trading at less than a third of the IPO price.

Soaring interest rates on high-risk debt markets and a wariness to lend have stopped the mega deals, necessitating a revival in leverage which is vital for the firm to be able to do deals of any significant scale.

The original agreement with Beijing Wonderful Investments Ltd — the legal entity set up by China Investment Corp to invest in Blackstone — was struck in May 2007. That pact allowed the sovereign wealth fund to own up to 9.99 percent of the private equity firm.

In a regulatory filing on Thursday, Blackstone said the parties had entered into a new agreement to raise the beneficial ownership limit applicable to Beijing Wonderful Investments and its affiliates to 12.5 percent. Raising the stake in open market would not require regulatory approval also.

This could have implications for Blackstone’s investments in India too as wealth funds from the Middle East and Asia are among today’s most coveted LPs. The current trend being observed is that these SWF’s buy into private equity firms thereby giving them an indirect presence in the countries where these PE firms invest.

China  Investment Corporation (CIC), sovereign wealth fund from China, with an initial corpus of   $200 billion, almost 87% of India’s total forex reserves — has already made an indirect foray into India through its  substantial $3 billion stake in US-based private equity group Blackstone, giving it an indirect entry into India.

Among the top three private equity funds active in India, Blackstone already has a 50% stake in textile major Gokaldas, 14.5% in Nagarjuna Constructions, 14%(the latest) in the Eenadu group — and was even in the race for ailing public sector financial behemoth Industrial Finance Corporation of India (IFCI).

Singapore government’s Temasek has been the largest investor in Bharti Infratel deal. Carlyle Group announced the sale of a 7.5% stake to an Abu Dhabi fund for $1.35 billion. Carlyle invested $2.27mn in state owned Repco Home Finance. 


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China Investment Corporation To Hike Stake in Blackstone via Open Mkt

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