A Chinese textile producer that backed out of a deal to acquire a Pakistani company last month said business reasons sank the transaction.
The statement from Shandong Ruyi Science & Technology Group Co. follows a Wall Street Journal article that quoted a Pakistani executive as saying a lack of bank credit hit the deal.
In the statement on its website, Ruyi said it backed out of the $62 million deal to take majority control of Pakistan textile maker Masood Textile Mills Ltd. following a round of due diligence. “We needed to adjust the commercial terms,” it said, adding that the deal was only temporarily halted.
“Both parties are currently in a new round of negotiations,” it said.
Last week, Masood Chief Executive Shahid Nazir said in an interview with The Wall Street Journal that the Chinese company had told him problems plaguing banks in Ruyi’s home province of Shandong meant it couldn’t get credit to fund the deal. His comments came amid mounting concerns about stresses in the Chinese financial system as the country’s economy slows.
Ruyi’s statement, which is dated Thursday, said the Journal’s article had “serious discrepancies” and was “based on gossip.” It didn’t elaborate.
Calls to Ruyi rang unanswered on Monday. The company also couldn’t be reached last week.
Mr. Nazir last week said that “the door is still open to Ruyi if they can get finance,” but added his company is looking for new buyers.
Pakistan Prime Minister Nawaz Sharif arrived in China over the weekend for the Asia-Pacific Economic Cooperation summit, at which he planned to sign deals worth billions of dollars for China to help with the development of much-needed infrastructure and energy projects.
In its statement, Ruyi said its other projects in Pakistan are still going ahead. “In particular we want to stress, that even without Masood, Ruyi Group’s investments in Pakistan has far exceeded the original plan,” it said, adding that the Masood was “a small part” of its investment in the country.
Those other investments include two 660 megawatt coal-fired power plants, a $2 billion investment Ruyi is making in cooperation with one of China’s biggest power companies. According to the statement, the project is being backed by support from China Development Bank, Bank of China Ltd. and “other financial institutions,” and is part of the China-Pakistan Economic Corridor, the name given to the government initiative to better link the two nations economically with infrastructure and investment.
Another project, two 135-megawatt power stations to support production at a textiles industrial park, has support from Industrial & Commercial Bank of China Ltd. , as well as investment from Middle East and domestic Pakistani sources, the statement said, adding that the project has already started construction and was likely to be finished in 18 months.
A spokesman for ICBC declined to comment. Bank of China and China Development Bank couldn’t be reached for comment on Monday, when many businesses were closed for the APEC summit.http://online.wsj.com/articles/chinese-textile-producer-business-reasons-sank-pakistan-deal-1415619962
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