China to take $3 billion stake in Blackstone

(CNNMoney.com) -- A state-run investment arm of the Chinese government will take a $3 billion stake in private-equity firm The Blackstone Group, according to a joint statement released on Sunday.

China's soon-to-be established State Foreign Exchange Investment Company said that the investment would be in the form of non-voting common units. The purchase price per common unit will be 95.5% of the public offering price of Blackstone's planned $4 billion initial public offering.

Blackstone, which filed its prospectus with the Securities and Exchange Commission in March, has $78.7 billion under management, and has participated in some of the biggest leveraged buyouts ever, including the $23 billion purchase of Sam Zell's Equity Office Properties.

China announced in March that it is setting up an investment company to help improve its returns on its $1.2 trillion of foreign exchange reserves.

The State Foreign Exchange Investment Company's stake will be reduced, if necessary, immediately after Blackstone's IPO in order to keep it below 10%. The company has agreed to hold its investment for at least four years.

"We are very pleased to be able to make the State Investment Company's very first investment in such a well-respected firm as Blackstone," said Lou Jiwei, head of the working group of the State Investment Company.

Stephen A. Schwarzman, chairman, chief executive officer and co-founder of Blackstone, welcomed the deal. "We are proud to be part of such a significant transaction for both of our organizations," he said.

The investment will close concurrently with Blackstone's IPO.