China Pacific Group, a portfolio company of The Carlyle Group, has raised $3.1 billion in an initial public offering ahead of its launch on the Hong Kong Stock Exchange next week.
The company, China’s third largest insurance company, sold 861.3 million predominately new shares – equivalent to a 10.2 percent stake – at HK$28 ($3.6; €2.5) per share, slap in the middle of its indicative price range of HK$26.8 to HK$30.1, according to various media reports. It is the seventh largest IPO seen globally this year.
The Carlyle Group, which is the second largest shareholder in the insurance giant, first invested in China Pacific Group together with American insurance company Prudential Financial at the end of 2005, committing RMB3.3billion for a combined 25 percent stake in the Group’s life insurance business. At the time China Pacific was facing bankruptcy and Carlyle and Prudential invested with the intention of turning around the operations of the life insurance arm.
In 2007, before the Group listed on Shanghai’s A-Share market, Carlyle upped its investment and converted its holding to a 17.3 percent stake in the parent group. In total, over the two funding tranches, Carlyle itself has invested around $800 million in China Pacific, an industry source confirmed to PEI Asia. Based on today’s IPO share price, this would give the firm a paper return of roughly 6x its initial investment.
However, Carlyle, which is subject to a one-year lock-up period post-IPO, has not sold any of its shares in the insurance group and has no plans to “rush for the door”, according to the industry source. Due to the new share issuance, the private equity firm has seen its 17.3 percent stake in China Pacific diluted to around 15 percent, the source added.
This is China Pacific’s second attempt at a Hong Kong listing. Last year, its plans to raise more than $4 billion in an IPO in Hong Kong were put on hold by weak capital markets.
For Carlyle, it marks the fourth China-based portfolio company to list this month. China Forestry and Kaisa Group listed on the Hong Kong Stock Exchange while Concord Medical Services listed on the New York Stock Exchange. As with China Pacific, the firm has maintained its stakes in all three companies.
Pre-IPO, the largest shareholder in China Pacific was Chinese state-owned steel enterprise Baosteel. Shanghai-government backed energy company Shenergy is another major shareholder.
According to several media reports, China’s Hopu Investments was the single biggest purchaser of new China Pacific stock, buying $430 million worth of shares according to the Financial Times.
Hopu, the $2.5 billion fund set up by former Goldman Sachs executive Fang Fenglei, has embarked on a series of large PIPE deals in 2009. In January, the fund reportedly bought around $400 million of shares in Bank of China, as the lead investor of a consortium which allegedly purchased a total of $700 million worth of shares from exiting shareholder Royal Bank of Scotland.
Also in the banking sector, the firm was then part of a consortium of investors that reportedly purchased a 6 percent stake in China Construction Bank from Bank of America in May. Temasek, Hopu’s anchor investor, also participated in the transaction, which was apparently worth $7.6 billion in total.
Then in July, the firm along with Chinese state-owned enterprise COFCO reportedly invested around $800 million in China Mengniu Dairy Company in return for a combined 20 percent holding.
China Pacific Insurance will begin trading on 23 December.