US firm seeks to win Beijing's nod by reducing acquisition in construction machinery maker to 50pc at a higher price The Carlyle Group has reduced its proposed stake in Xugong Construction Machinery, China's largest construction equipment maker, and raised its offer price in an attempt to gain government approval for the purchase. US private equity fund Carlyle would pay 1.8 billion yuan for 50 per cent of Xugong under the terms of a revised agreement. Xugong's local government-owned parent, Xuzhou Construction Machinery Group, would retain the other half, the firm's Shenzhen-listed subsidiary Xugong Science & Technology said in a statement to the exchange yesterday. The original plan to pay a total three billion yuan for an 85 per cent stake in the Jiangsu-based machinery producer has been stalled by government opposition since it was announced one year ago today. Carlyle, which would no longer have the right to name the chairman of the board, would appoint five of the company's 10 board members and the vice-chairman. Opposition to foreign investment in a broad spectrum of industries has been growing this year as China nears the end of its World Trade Organisation accession period and multinational players start to dominate in some markets. Carlyle, Xugong and its parent company all refused to comment yesterday. The revised deal has not been formally approved. Sources involved in negotiations are optimistic the government will see it in a favourable light. 'There is some indication that the government will now approve the deal but there is nothing concrete, not even a verbal agreement,' according to one source close to the deal. The latest agreement values Xugong at almost 100 million yuan more than in the deal signed a year earlier, based on information disclosed by the companies. Carlyle was originally adamant it would not pay more for Xugong because that would imply it had valued the company unfairly, to begin with. 'Although Carlyle has raised its offer it is still paying too little,' Xiang Wenbo, executive president of Xugong competitor Sany Group, said yesterday. 'The price is astoundingly low and it is unclear whether the Ministry of Commerce will approve the deal.' Mr Xiang earlier this year criticised the Xugong deal on nationalist grounds, accusing Carlyle of humiliating the Chinese people and threatening national security. In June, he made a public offer to pay up to 30 per cent more than what Carlyle is offering. Xugong officials dismissed the offer as grandstanding, saying Sany does not have the resources to acquire its much larger competitor. Mr Xiang has been lobbying hard in Beijing to scupper the Xugong deal. The acquisition appears to have entered political limbo with the commerce ministry, the principal approval authority, requesting further investigation from the State-owned Asset Supervision and Administration Commission, Xugong's eventual owner.