Tags: Asia, China, Chinese Investments

Goldman Sachs Finding Resistance to Deals in China

By , Money Morning •

By Jason Simpkins
Staff Writer

Goldman Sachs (GS) will relinquish its control of the consortium that owns China's largest meat processor, the Financial Times reported. The unexpected decision again raised concerns about China's ongoing reluctance to allow foreign ownership of high-profile domestic companies.

Last year, Goldman Sachs teamed up with Chinese private equity firm CDH Investments. Together they set up a takeover vehicle known as Rotary Vortex, in which Goldman held a 51% stake. After a year of regulatory scrutiny, Rotary Vortex acquired full control of Shineway Group, owner of China's largest meat producer.

However, Henan Shuangui Investment & Development, part of the Shineway Group, said Tuesday that Goldman now plans to become the minority partner in the consortium. The statement indicated that Goldman would sell 5% of its stake in Rotary Vortex to CDH. That would leave Goldman with 46% of the company and CDH with 54%.

An undisclosed source close to the consortium told the Financial Times that "the move will not have any significant financial or structural implications because the sides have equal voting rights when it comes to running the business."

Private equity consortiums don't usually disclose internal share transfers, but Chinese laws governing changes in ownership are forcing Goldman's hand. The resistance posed by the Chinese government and the murky details surrounding the deal are evidence of a domestic backlash against the U.S. banking juggernaut owning an important Chinese asset.

According to the FT report, Chinese regulators recently blocked an investment arm of Goldman Sachs from acquiring a 10.7% stake in Midea Group, an appliance maker, without giving a reason.

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