Blackstone To Buy 20% Stake In China National BlueStar

Private equity firm Blackstone Group has signed an agreement to buy a 20% stake in diversified chemicals maker China National BlueStar for $600 million.

Under the agreement, Blackstone will buy the stake from government-owned parent firm China National Chemical (ChemChina), which will continue to hold an 80% interest in BlueStar. Two Blackstone executives will join BlueStar's board of directors. They will help build what ChemChina and Blackstone say will be a global leader in the specialty chemical industry.

The deal underscores the advantage of Blackstone's ties with Chinese authorities. Other private equity firms have had a difficult time trying to buy stakes in large government-owned firms in China. But in June, China's state overseas investment agency paid $3 billion for 10% of U.S.-based Blackstone, giving Blackstone what some say is a favored status with government administrators.

The transaction also allows ChemChina to tap into Blackstone's experience and financial expertise in the chemical enterprise. ChemChina Chairman Ren Jianxin says, "Given Blackstone's extensive and successful experience in the global chemical industry, notably past ownership of Celanese and Nalco, this investment will assist BlueStar in its growth and expansion."

BlueStar has annual sales of $4 billion from a variety of products including petrochemicals, specialty chemicals, organo-silicones and silicone resins, water-treatment-membrane modules, and chemical reaction equipment.

The acquisitive chemical maker has undertaken a number of overseas forays. For instance, earlier this year, BlueStar completed the $500 million acquisition of Rhodia's silicon operations to form Bluestar Silicones based in Lyon, France. In 2006, BlueStar bought France-based Adisseo, the second largest methionine animal food additive maker after Degussa, from private equity firm CVC Capital Partners.