Carlyle Group Said to Quit CPIC

Carlyle Group will quit China Pacific Insurance (Group) Co., Ltd. (CPIC, SEHK: 2601 and SHSE: 601601), sooner or later, said an industry observer.

The lockup period of 692 million H-shares the US private equity firm controls in the Chinese insurer expired on July 11. The insurer closed at HKD 30.75 on the Stock Exchange of Hong Kong on the day, down 2.5 percent from the previous trading day. The trading volume was about 7.77 million shares, representing a tiny rise from other trading days. To some extent, it indicates that Carlyle Group did not sell the H-shares yesterday. Actually the US investor said as early as January 1 this year that it had no plan to sell shares in listed companies over the following six months.

However, previous sources said that large fund management firms in Hong Kong had received inquiries about whether they would like to take over H-shares Carlyle Group holds in CPIC and how much they would like to pay from Morgan Stanley and Goldman Sachs. Carlyle Group declined to make a comment on the report, but according to industry observers, it will quit the Chinese insurer and the problem is when it will quit. Actually, CPIC has realized this and in May 2010, one of its top executives said in an interview that as a financial investor, Carlyle Group was likely to quit after expiration of the lockup period of the restricted shares.

Carlyle Group gained approval from the China Insurance Regulatory Commission (CIRC), the top Chinese insurance regulator, to invest USD 410 million in CPIC in January 2006. And since December 30 last year, it has cashed in USD 2.66 billion through selling a total of 631.2 million H-shares of the insurer at prices with no premium. After the sales, its stake in the latter dropped to 8.12 percent, or 692 million H-shares, from previously 15.39 percent. Provided that it sells the shares at the price of HKD 30.75 each, it will cash in about HKD 21.28 billion, or USD 2.73 billion. That is to say through selling all H-shares held in the insurer, it could cash in about USD 5.39 billion in total, representing a return on investment of 12 times from an initial injection of USD 410 million and 4.75 times from a nominal injection of about CNY 5.69 billion.