China buys $3bn Blackstone stake

Analysts say the deal will aid Blackstone's investment in China

The Chinese government has agreed to pay $3bn (£1.5bn) for a 10% stake in US private equity company Blackstone.

It will give Blackstone a head start in Chinese takeover deals and allow China's government to tap into the global private equity boom.

The news, which is likely to create some political opposition in the US, comes just days before Chinese Vice Premier Wu Yi visits the United States.

China is buying the stake through its newly formed state investment fund.

Share sale

Blackstone has also given details of its planned share sale.

The second largest US private equity firm plans to raise between $3.87bn (£1.97bn) and $4.13bn (£2.10bn) in its initial public offering later this year.

Shareholders will own a stake in the management company rather than the portfolio of companies in which it has invested.

They will have only limited voting rights and no right to elect the general partner or directors.

Blackstone will list on the New York Stock Exchange with the symbol BX.

'Enhancing access'

Together with the investment from China, Blackstone could raise up to $7.75bn.

When the Chinese are buying into private equity, every investor in the world should take note BBC Business Editor Robert Peston Why the deal matters

"For both China and Blackstone, it's about enhancing access and developing deeper relationships," said analyst Monte Brem, chief executive of advisory firm Leucadia Capital Partners.

"The Chinese government wants to increase its access and role in the global private equity market; Blackstone wants to increase its access and role in China."

For Blackstone, the deal will bring an inevitable advantage when investing in China, where foreign companies often struggle to gain support from Beijing when trying to buy Chinese companies.

But the deal will raise eyebrows among some US politicians wary of China's growing economic clout.

Political problems?

In 2005, China's plans to buy US energy giant Unocal fell through in the face of political opposition in Washington.

The new fund will be trying to avoid any political problems with its overseas investments, according to Jesse Wang, chairman of the government-owned Jianyin Investment, which represented Beijing in the deal with Blackstone.

"The fund is sizable and people may worry that it's from China and a state investment vehicle," he said.

"I think they are going to have mostly commercial kinds of investments, not involving sensitive investments."