SANY Heavy Industry Co, China's No. 1 maker of pumps for concrete, said its parent firm plans to buy 30 percent of Shenyang Machine Tool (Group) Co - a deal that could be worth more than one billion yuan (US$128 million).
Sany Corp has forwarded its bid to the Shanghai United Asset and Equity Exchange for the stake, but the deal is still pending due to considerable uncertainty which was not explained, according to a statement by Sany Heavy Industry to the Shanghai Stock Exchange yesterday.
No figure was given for the bid price. Shares of Sany Heavy Industry rose 1.71 percent to 37.98 yuan yesterday.
Shenyang Machine Tool, the nation's largest machine tool maker based in northeastern Liaoning Province, had 49 percent of its stake available for auction at the equity exchange in April. The aim is to attract two to three investors, including one strategic partner, to revamp its corporate structure.
Total assets of State-owned Shenyang Machine Tool are 3.46 billion yuan, with a net asset of more than two billion yuan, according to the equity exchange. The bid price is usually "several times" the net asset value, industry insiders said.
The final result of the stake auction should come out next month, Shenyang Machine Tool Co Ltd, the listed unit of Shenyang Machine Tool (Group), said last week.
Net profit of Shenyang Machine Tool Co Ltd rose nearly 40 percent last year to 133 million yuan as China's growing manufacturing sector spurred demand.
Sany Heavy, based in central Hunan Province, lost to US buyout firm Carlyle Group last year for control of Xugong Group Construction Machinery Co, China's largest crane and road roller maker.
It could face competition from hedge fund JANA Partners LLC, which also joined the bidding, according to a report by Reuters. Sany Heavy borrowed five billion yuan from China Development Bank in December to finance overseas acquisitions.
China is the world's third-largest machine tool maker in terms of total output, after Japan and Germany, but it is still weak in high standard computer numerical control machine tool.
The total output of the machine tool industry last year was worth 166 billion yuan, a jump of 27 percent over 2005, the National Bureau of Statistics said.