Allianz hedges stake in CPIC via $700m deal with Goldman

German insurer Allianz has struck a $700m (£471, €654m) deal with Goldman Sachs to protect most of its stake in China Pacific Insurance Group (CPIC).

The deal will see Allianz hedge a part of its stake in CPIC and lock in profits from two rounds of investments that the German firm made in China's third-largest insurer, according to a term sheet of the deal seen by Reuters.

Goldman acted as sole bookrunner for the transaction.

Allianz currently owns 243.2 million CPIC shares, according to Hong Kong stock exchange data.

CPIC shares are up 18% from when Allianz made its second investment and are up 31.3% from when Allianz made its first purchase.

Pursued by the news agency, Goldman refused to comment on the transaction while Allianz did not immediately respond to a request seeking comment.

Transaction

Under the deal, Allianz agreed to a future sale of 147.7 million Hong Kong-traded shares of CPIC at HK$36.77 each to Goldman in a $700m transaction. That price is equivalent to a 4.2% discount to CPIC's closing price on 18 March.

Through that transaction, Allianz gets to hold on to its stake in CPIC for now while locking in profits from investments made in 2011 and in 2009.

Separately, the deal means Goldman assumed a long position on CPIC, and to offset that, the bank sold 147.7 million CPIC shares at HK$36.77 each late on 18 March, Reuters reported.

The deal is similar to a hedge Goldman entered in 2011 with American Express under which AmEx took a short position in Industrial and Commercial Bank of China (ICBC) to offset part of its long-term investment in the Chinese lender.

Allianz, Europe's largest insurer, bought $855m worth of shares in CPIC from private equity major Carlyle Group in January 2011, after buying into CPIC in December 2009.

The German firm was a cornerstone investor in the Chinese firm's Hong Kong floatation that year with a $150m purchase.