Carlyle Group LP (NASDAQ:CG) plans to offload its remaining stake in China’s third-largest insurer CPIC for about $790 million. If the deal goes through, the private equity group will register its largest dollar profit on an investment. Over the past two years of stake sale, Carlyle group gained more than $4 billion, five times more than the $800 investment in CPIC between 2005 and 2007 for a 17 percent stake. Carlyle Group LP (NASDAQ:CG), one of the world’s biggest private equity companies has been focusing on Asia for a decade now. As per the information available on its website, it has 38 current investments in Asia, including 19 in China. The investment in CPIC was handled by X.D. Yang, Hong Kong-based managing director and co-head of Carlyle Asia Partners.
The US group, with more than $157 billion in assets under management, is offering 203 million Hong Kong-traded shares of China Pacific Insurance (Group) Co Ltd (CPIC) at a price range of HK$30 to HK$30.30 per share. If calculated with the top price range, the proceeds from the shares total around $5.1 billion, with a profit of $4.3 billion, excluding any dividends Carlyle Group LP (NASDAQ:CG) received on its holdings.
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CPIC shares have gained more than 40 percent over the past year, reaching a 52-week high last Thursday, owing to rising demand for insurance products in China backed by the country’s rising middle class, and a bull market. Yesterday, China Pacific closed at HK$31, after gaining about 20 percent in the past month, backed by a surge in Chinese stock prices.
In December 2005, Carlyle Group LP (NASDAQ:CG) and Newark, New Jersey-based Prudential Financial Inc. (PRU) agreed to acquire 25 percent stake in China Pacific Life Insurance Co., a unit of Pacific Insurance, for 3.3 billion Yuan (then $409 million). In 2007, the investment was converted into a stake in the parent company. Then in 2009, when the insurer sold stock in the city, the investment was turned into Pacific Insurance’s Hong Kong-listed shares. The Washington-based private equity firm has been selling CPIC’S shares since December 2010, after the lock-up expiration. As per the stock exchange filings, the group sold 221 million shares in July.
Goldman Sachs Group, Inc. (NYSE:GS) and UBS AG (NYSE:UBS) have been hired as joint book runners for the stake sale.