Shanghai Electric buys 40 pct stake in Italian power engineering firm

Shanghai Electric has agreed to buy a 40 percent stake in Italian power engineering company Ansaldo Energia for 400 million euros (US$554 million), the latest deal in the rapidly consolidating sector.

The deal will give Shanghai Electric access to some key technology in gas turbines while helping Ansaldo Energia boost sales in Asia, which represents half of the world's gas turbine market.

Under the agreement, the companies will form two joint ventures in China for gas turbine manufacturing for Asia markets and also set up an R&D center in Shanghai.

But Shanghai Electric's access could be limited as Ansaldo Energia also said it has signed a partnership with South Korea's Doosan Heavy Industries, a former suitor of the assets, for further development of turbine technology.

Shanghai Electric is China's leading power generation equipment and machinery maker. Trading in its shares was suspended in Shanghai and Hong Kong today and will resume on Monday.

The Chinese company will acquire the stake from private equity fund Fondo Strategico Italiano.

The deal adds to competition in the global power equipment sector, where mergers and acquisitions activity has heated up recently. General Electric's US$17 billion offer for French firm Alstom's energy business could face a rival offer from Siemens.