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Insurer's HK share sale to aid cash flow

CHINA Pacific Insurance (Group) Co said yesterday it plans to sell up to 1 billion shares in Hong Kong to raise at least 23.5 billion yuan (US$3.6 billion), according to analysts, to replenish capital.

The Shanghai-based insurer, 17.3 percent owned by a Carlyle-led consortium, said in a statement that it will sell up to 1 billion Hong Kong-dollar denominated shares, whose price will not be lower than the average weighted price of its Shanghai-listed yuan-backed A shares in the 20 trading days before yesterday, which was calculated as 23.5 yuan.

"It's very likely that China Pacific's H shares will be priced at least 30 yuan per share," said Luo Yi, a China Merchants Securities Co analyst yesterday.

The insurer said the timing and terms of the share sale will depend on market conditions.

The deal is pending approval from shareholders and regulators in Chinese mainland and Hong Kong.

The Carlyle-led consortium's holding of China Pacific's A shares is subject to a three-year lockup period. However, the consortium can convert its entire stake into H shares when the insurer goes public in Hong Kong. The H share sale enables the consortium to cut its holdings earlier.

The consortium, which includes Prudential Financial Inc, paid US$410 million for a combined 24.98 percent stake in the life insurance arm of China Pacific in December 2005.

In May 2007, the consortium transferred the stake to a 19.9 percent holding in China Pacific to pave the way for the insurer's listing in Shanghai with an agreement to lock up the stake for three years from the time of the insurer's Shanghai listing.

The 19.9 percent stake was diluted to 17.3 percent when the insurer went public in Shanghai in December 2007.

At that time, the insurer said it planned to sell up to 900 million shares in Hong Kong as soon as possible and the price offer would be at least 30 yuan each. But it shelved the plan last year due to a volatile market.

The consortium's stake is worth US$5.4 billion based on the insurer's current price.


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