JANA Fails to Invests into Shenyang Machine Tool (Group)

Guan Xin, board secretary with Shenyang Machine Tool Co., Ltd. (SZSE: 000410), a listed arm of Shenyang Machine Tool Group, confirmed the story, adding that the main reason was that the deal did not gained approval from concerned Chinese authorities. However, industry experts do not think so. In their opinion, it was the US fund's capital shortage that led to the failure in cooperation.

Founded in 2001, JANA is a large-sized hedge fund with over USD 7 billion under management. Companies it bought into included Valero, Time Warner Inc., Ingersoll-Rand Co. and etc. Unlike other US hedge funds, JANA mainly earns profits via restructuring business of target companies. So far, it has invested as much as USD 20 billion in companies worldwide, with a compound 24% yearly return on investment. Stung by the US subprime crisis, hedge funds worldwide reduced their investment sizes in markets overseas to a largest extent. And there is no exception to the US hedge fund.

Founded in December 1995, Shenyang Machine Tool Group is one of the largest machine tool manufacturers in China. In order to fuel expansion, it made a decision to introduce strategic investors. And in April 2007, it put a 49 percent stake on sale via the Shanghai United Assets and Equity Exchange. It first planned that a 30 percent stake would be sold for CNY 1.01 billion; and then, the remaining 19 percent stake would be sold for CNY 640 million.

JANA, a San Francisco-based hedge fund, defeated top Chinese engineering machinery manufacturer Sany Group Co., Ltd. and finally put the 30 percent stake in Shenyang Machine Tool Group into its own bag in last June. The fund, which also expected to acquire the other 19 percent stake, had been preparing documents for a second bidding till January this year. Notably, it hoped that the Chinese government could agree to its plan to restructure Shenyang Machine Tool Group with other two companies.