Blackstone Said to Complete BlueStar Purchase, First in China

Oct. 3 (Bloomberg) -- Blackstone Group LP completed its first Chinese acquisition, paying as much as $600 million for a stake in specialty chemicals maker China National BlueStar Group Corp., three people familiar with the plan said.

Blackstone, manager of the world's biggest buyout fund, agreed in September 2007 to buy the 20 percent stake from state- owned China National Chemical Corp., which will own the rest of BlueStar. The deal's completion may be announced next week, the people said, declining to be identified before announcement.

New York-based Blackstone is trying to catch up with The Carlyle Group and TPG Inc. in China as the global credit crunch chokes off funding for multibillion-dollar deals. China's government has tightened scrutiny of overseas acquisitions of state-owned companies in the past two years, forcing buyout funds to seek out smaller, private firms.

``It's a good start, given it's a state company and the ongoing environment,'' said Vincent Pun, a principal at Diversus Investment Advisers Pty Ltd., which advises private equity and hedge funds. ``Blackstone is obviously stepping up to grab a bigger slice of the China market after having had some difficult moments in the past.''

John Ford, a New York-based spokesman for Blackstone, couldn't immediately be reached on his mobile outside of business hours. Xi Yuxin, a Beijing-based official at China BlueStar, declined to comment.

The $600 million investment includes a $100 million shareholder loan which will be forgiven if BlueStar's profit meets an undisclosed target this year, one of the people said.

Leung's Deals

Blackstone opened its private equity office in Hong Kong in January 2007 and hired the city's former Financial Secretary Antony Leung to lead the expansion into the world's fastest- growing major economy.

Leung, 56 and chairman for the greater China region, helped the firm broker two deals in China, including the sale of a 9.4 percent stake in Blackstone to the nation's sovereign wealth fund and the $3 billion purchase of Barclays Plc shares by China Development Bank.

Blackstone appointed Leung and Ben Jenkins, head of Asia- Pacific private equity, to BlueStar's board, according to a statement filed by Shenyang Chemical Industry Co., a unit of BlueStar and China National Chemical, to the Shenzhen stock exchange in September 2007.

Blackstone this week hired 12 bankers in Asia from companies including Lehman Brothers Holdings Inc. HSBC Holdings Plc to help build its mergers advisory business.

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at at lagerkranser@bloomberg.net