The Carlyle Group has agreed to buy 49% of Yangzhou Chengede Steel Tube for 80 million dollars. The company manufactures large-diameter seamless steel pipes, and Carlyle's investment is expected to help the company grow its business in China as well as internationally. According to Huai-De Zhang, Yangzhou's founder and chairman, ""In China, Carlyle has demonstrated a deep understanding of local businesses and an ability to work well with Chinese companies. The Carlyle brand will also help attract senior management talent to help expand both our domestic and overseas business."
While the deal is not particularly noteworthy size, there are two factors that make it interesting:
1.) There have been numerous reports that Chinese companies were not exactly impressed with the idea of the U.S. private equity firms getting involved. However this deal, along with Huai-De Zhang's comments about "the Carlyle Brand" suggest that that may be changing. If it is, we may be able to expect rapid growth in private equity in China.
2.) Earlier this year, I wrote that Carlyle Group Chairman David Rubenstein had told Maria Bartiromo that his firm would double its investment in China in 2007. If Carlyle makes good on that promise, and other buyout shops follow its lead, we could see an LBO-fueled continuation of the bull market in China.
