AVCJ China Awards: Exit of the Year – China Pacific Insurance

The investee was insolvent and losing money at the time, like many institutions in China's beleaguered financial services sector. For foreign investors, there was the prospect of participating in a turnaround story, but regulatory approvals were hard to come by.

Apart from Newbridge Capital, which took a close to 18% stake plus management control of Shenzhen Development Bank in late 2004 - it could be argued that no private equity firm managed to secure itself a more influential position in the sector than Carlyle. After three years of negotiation it agreed to inject RMB3.3 billion (then $410 million) for a 24.98% stake in China Pacific's life insurance unit.

Getting the deal done meant putting company management through a crash course in private equity.

"We knew the company had great potential but a lot of work had to be done," Yang told AVCJ last year. "We spent a fair amount of time explaining what Carlyle is. That was a good process for the two sides to get to know each other and I have to give credit to China Pacific's management for recognizing that a global firm like Carlyle could make a difference to their business."

The private equity firm subsequently took its total investment China Pacific to $740 million in 2007, converting its stake into a 19.9% interest in the parent company following a restructuring of the various subsidiaries. The company listed in Shanghai the same year and went public Hong Kong in 2009, its turnaround complete.

Carlyle's exit was protracted, as was to be expected given the lock-up periods on its China Pacific shares. The first block trades came in December 2010 and January 2011, generating proceeds of $2.6 billion between them. There followed three more over the next 18 months before the final portion - representing 2.2% of China Pacific's overall share capital - was sold for $796 million.

The full proceeds top $5 billion, making it not only by some distance the most successful investment in Carlyle's debut Asia buyout fund, but also supposedly the firm's largest-ever cash exit globally.

"Over [more than seven] years, we have worked very closely with the company, company management and other shareholders in support of transforming China Pacific into one of the best run and most successful insurance companies in China and a Fortune Global 500 company," Yang said in response to the final exit.

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• Topics
• Exits
• Greater China
• Financials
• China
• Financial Services
• Exit
• The Carlyle Group