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December 8, 2009

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Carlyle eyes net of US$4b in insurer

CARLYLE Group, the United States buyout giant backing China Pacific Insurance (Group) Co, could make a US$4-billion profit - a return of more than six times its investment - once China's No. 3 life insurer floats shares in Hong Kong.

That would be the biggest investment return for a private equity deal in China, and Carlyle's most successful investment in Asia, according to people with direct knowledge of the matter.

Asia-focused PE funds often complain that Asia can be a cash drain, with plenty of money going into the region, but little coming out. But Carlyle could potentially make an eye-popping return on China Pacific.

Carlyle paid an average 4.20 yuan (62 US cents) per share for its 17-percent stake in China Pacific, or just more than US$800 million, in a series of investments between 2005 and 2007, according to sources.

That equates to about HK$4.75 (61 US cents) per share.

Should China Pacific price its planned Hong Kong initial public offering at HK$30.10 per share - the upper end of an indicated range - Carlyle's stake would be worth more than US$4.8 billion, more than six times what it has invested, and a big win for Carlyle in Asia, where deal competition is getting tougher.

In October, TPG Capital sold its stake in top Australian department store chain Myer in an IPO, netting a profit of US$1.46 billion.

Even before China Pacific went public in Hong Kong, Carlyle co-founder David Rubenstein showcased the fund's success in the insurer at its annual global meeting in Washington D.C.

"When Rubenstein talked about Asia, he spent quite a long time purely talking about China Pacific and giving high praise to X.D. Yang," said one source who attended the meeting.

X.D. Yang, a Hong Kong-based managing director for Carlyle's Asia buyout fund, was the deal maker for the China Pacific investment in 2005.

Carlyle and China Pacific declined to comment for this article.

Last month, Rubenstein told an industry forum in Hong Kong that China would be the single most attractive country for Carlyle in the next couple of years.

China Pacific aims to list in Hong Kong before Christmas.


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