Saturday, October 18, 2008

China's sovereign wealth fund raises stake in U.S. company to 12.5%

China Investment Corporation , the country's 200-billion-U.S.-dollar sovereign wealth fund, has raised its stake in U.S. investment group Blackstone LP to more than 10 percent -- still short of the 12.5 percent limit recently agreed between the two parties, a source close to the deal said.

"The investment exceeds 10 percent," the source was quoted by Saturday's China Daily as saying. But the source did not reveal when the investment portion might reach the 12.5 percent limit.

Analysts said the fundamentals of Blackstone might justify CIC's additional investment, although the prospects of the U.S. financial market remain murky.

According to a filing of Blackstone with U.S. regulators, a revised agreement was reached Thursday between the firm and CIC unit Beijing Wonderful Investments Ltd. to raise the limit of CIC's holding of Blackstone stake up to 12.5 percent from the previously agreed 9.99 percent.

There was no official comment from CIC on its additional share purchase.

CIC paid 3 billion U.S. dollars to acquire 101 million shares before Blackstone's June 2007 initial public offering, committing to hold those non-voting common units for four years. Its investment has lost more than two-thirds of its value as Blackstone shares slumped amid global financial turmoil since last year.

When CIC purchased its Blackstone stake last year, the shares were valued at 31 U.S. dollars apiece. They are now worth about 9 dollars.

The purchase of the additional Blackstone stake does not require regulatory approval and can be carried out through the open market and be resold freely.

Different from many U.S. financial institutions that have had to be bailed out by the government, Blackstone's liquidity and asset quality remain sound, the source said, suggesting the CIC investment is aimed at long-term interest.


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