by Duncan Kerr

The Blackstone Group is in preliminary talks to buy a stake in a state-owned Chinese chemicals business, which would mark the first deal the US private equity firm has made in the country since China's government took a 9.9% stake in Blackstone last month.

Blackstone is seeking to buy 30% in China National BlueStar Corporation’s chemicals business.

The deal, believed to be worth close to $500m (€372m), comes as Blackstone prepares its landmark $40bn initial public offering on the New York Stock Exchange. Pricing is expected to be released today, with the official launch of trading tomorrow. Blackstone has estimated its units will be sold for between $29 and $31 each, raising as much as $7.8bn (€5.8bn).

The Securities and Exchange Commission said yesterday the deal was being reviewed by agency experts. Christopher Cox, chairman of the SEC, said he received letters of concern from lawmakers and a labor federation, but would not say whether the agency would delay the offering.

Cox said: "Of course we are going to respond professionally to the questions that they raise, and those issues are also of interest to the SEC." He was referring to letters from the Senate finance committee, the House financial services committee and the AFL-CIO.

The development in Asia comes less than a month after the Chinese government said it would use $3bn of its vast foreign exchange reserves to buy the stake in Blackstone.

The investment is unprecedented, and underlines Beijing’s desire to tap into the private equity boom.

BlueStar, which is a subsidiary of the country’s largest chemicals manufacturer China National Chemical, controls stakes in locally listed businesses BlueStar Cleaning, BlueStar New Chemical Material and Shenyang Chemical Industry.

According to reports in the South China Morning Post, a leading Hong Kong newspaper, the discussions between Blackstone and the parent company are at an early stage.

Blackstone, which opened its first office for the Greater China market in January, is having to play catch-up in the country to rival sponsors Carlyle Group and Warburg Pincus which already have a few key deals in the mainland.

Blackstone hired former Hong Kong financial secretary Antony Leung Kam-chung to help broker deals in the country.