MOSCOW -- A long campaign by mysterious Chinese businessman Wang Jing to take control of a leading Eastern European aircraft engine producer may be poised for a breakthrough.
Wang is best known internationally for securing rights from the government of Nicaragua in 2013 to develop a $50 billion canal project across the Central American country that was to rival the Panama Canal.
Little progress has been made on the canal since. Wang has meanwhile turned his eyes to the skies, seeking to acquire a string of aerospace companies in Ukraine, the U.K. and Israel. In Ukraine, he has targeted Motor Sich, long the top producer of engines for commercial and military planes and helicopters in the former Soviet Union.
Ukrainian regulators, lobbied by U.S. officials concerned about Wang's plans and China's military ambitions, held back approval of his initial bid in 2017 and a renewed attempt in 2019 in partnership with state defense conglomerate Ukroboronprom. This time around, Wang has allied with influential local tycoon Oleksandr Yaroslavsky, who has been seeking to mobilize opinion to back the deal.
The boost from Yaroslavsky's conglomerate, DCH Group, comes as Motor Sich continues to struggle due to a loss of sales to Russia, traditionally its top market, as a result of Moscow's territorial seizures in Ukraine since 2014.
"The choice here is, either the Ukrainian government saves Motor Sich but risks angering the Americans (by approving Wang's purchase) or it gives up on Motor Sich under pressure from the U.S. and sooner or later the company simply ceases to exist," said Alexander Paraschiy, head of research at investment bank Concorde Capital in Kyiv.
He discounts the latter scenario given Ukraine's need for Motor Sich's output to sustain its military amid continued confrontation with Russia as well as the company's status as an employer of some 20,000 workers. The company's generated the equivalent of about $170 million in revenue in the first of 2020, as compared with annual revenue of $1.05 billion in 2013. For the half-year, it eked out a profit of 592.8 million hryvnia ($20.93 million).
"The enterprise has virtually no owner at the moment, its performance indicators are steadily deteriorating and urgent anti-crisis measures are needed to prevent its final destruction," Yaroslavksy said last month.
"DCH is ready to use its experience and knowledge to ensure that Motor Sich develops and works for the benefit of Ukraine," he said. "Our partners -- private Chinese investors -- have invested in a private Ukrainian enterprise intending to modernize it."
While Wang is bidding for Motor Sich as a private businessman, Beijing has been keen to upgrade China's engine manufacturing capabilities to support its ambitions for production of world-class military and commercial jets as well as missiles.
Motor Sich's technologies would thus be "useful" for China, said Douglas Barrie, a senior fellow for military aerospace at the International Institute for Strategic Studies in London.
"The challenges of developing a high-end military turbofan engine are considerable, hence why only a small number of countries... have a national capability developed over the past six decades or so," he said.
Wang originally made a $250 million bid for Motor Sich in 2017 through his company Beijing Skyrizon Aviation but has since also involved Beijing Xinwei Technology, a Shanghai-listed company he controls.
Xinwei was Wang's vehicle for his abortive $285 million purchase of Israeli satellite operator Space Communications, which was abandoned after a launch accident, and for a bid valued at more than 1 billion pounds ($1.28 billion) to buy British engineering company Doncasters Group from Emirati investors which reportedly foundered on U.S. security objections.
The Shanghai Stock Exchange suspended Xinwei's listing in May after the company racked up three straight years of net losses as revenues have dwindled. The company disclosed this month that Wang's shares in the company had been frozen by court action in relation to a company debt he had guaranteed.
The stock last traded at 1.39 yuan, down from a peak of 64.31 yuan in 2015 when Xinwei was a member of Shanghai's blue-chip SSE50 index.
The Security Service of Ukraine raided Motor Sich's office in 2018 over concerns that Wang had already taken majority control of the company by buying shares through different offshore vehicles and planned to sneak out technologies to China.
Trading in shares of Motor Sich, which then had a market capitalization equivalent to about $500 million, has been suspended ever since, with Skyrizon's stake administratively frozen. Under local law, approval from the Antimonopoly Committee of Ukraine is required for the acquisition of any stakes of at least 25%.
In renewing his bid for Motor Sich in August 2019, Wang said Ukroboronprom would end up with a 25% stake in the engine maker while Skyrizon and Xinwei would invest $100 million into the country's aircraft industry, best known for models from Antonov Co. In the process, Xinwei would absorb Skyrizon but the offer again failed to win regulatory backing.
Wang latest bid, submitted last month with DCH, appears to stand better odds.
Yaroslavsky is one of the country's wealthiest men and has proved savvier than most of his peers at remaining in the good graces of the authorities even through repeated dramatic political change. President Volodymyr Zelenskiy publicly thanked Yaroslavsky in March for helping secure COVID-19 test kits from China.
DCH itself is involved in sectors ranging from mining to tractor making and construction as well as hospitality and operates Kharkiv International Airport in northeastern Ukraine.
Concorde's Paraschiya said that DCH's financial strength and Yaroslavsky's proven record at turning around failing enterprises give the latest bid "a very good chance" of success.
Washington remains concerned about the deal though U.S. diplomats' talk of bringing in private American investors has yielded nothing for Motor Sich so far.
After calling Zelenskiy on Aug. 26, U.S. Secretary of State Michael Pompeo issued a statement saying he had "raised U.S. concerns regarding malign PRC (People's Republic of China) investment in Ukraine," naming Motor Sich.
Yet Oleksiy Kusch, an economist in Kyiv with the Growford Institute, a financial research center, said Wang's new bid is well-timed.
"The U.S. election creates a very narrow window to get this deal through since the Trump administration's focus on Ukraine is weakened," he said. "Motor Sich is not going to be a priority for (Donald) Trump or (Joe) Biden for the next few months."
Wang and Yaroslavsky are stepping up the pressure on regulators for action. In a statement last month, DCH argued that by law, the Antimonopoly Committee must rule on the bid within 135 days and "has no legitimate grounds" to refuse clearance since the deal would not affect competition in Ukraine.
Yaroslavsky warned otherwise of the possible "filing of multimillion-dollar actions by the Chinese party in international courts and a significant cooling in bilateral relations with China as a key trading partner of Ukraine."
With his target on the nation's bureaucracy, he concluded, "On behalf of DCH and our Chinese partners, I ask the president to intervene in this situation."
Skyrizon meanwhile this month filed a notice under China's 1992 investment treaty with Ukraine, seeking to open arbitration proceedings over what it suggested had been an illegal expropriation of its investment in Motor Sich.
Skyrizon and Xinwei could not be reached for comment.