Carlyle Group has sold a 2.5 percent stake worth around $860 million in China Pacific Insurance (Group) Co Ltd <2601.HK>, sources said, helping the buyout fund recoup its investment in what could be one of its best Asian deals to date.

That would mean that Carlyle, which paid just over $800 million in a series of investments between 2005 and 2007 for a 15.4 percent stake in the Chinese insurer, is still sitting on an unrealized profit of about $4 billion, based on Thursday's closing prices, as per Reuters' calculations.

Carlyle's stake in China Pacific <601601.SS> will drop to about 12.9 percent after the sale and the private equity fund is poised to make nearly six times return on its initial investment.

Leveraged buyout deals, which dropped dramatically after the credit crisis, have started to rebound. A total of $211 billion of buyside private equity deals were struck globally this year, up from $121 billion in 2009, and the fourth quarter of this year is the busiest fourth quarter since 2007, Thomson Reuters data shows.

Asia has seen a flurry of private equity exits this year. Prominent among those include Lone Star's $4.1 billion sale of a controlling stake in Korea Exchange Bank <004940.KS> and MBK Partners's $2 billion sale of China Network Systems.

STOCK OVERHANG

Carlyle sold 215 million shares in China Pacific at HK$31.15 each, a source who had direct knowledge of the matter told Reuters.

You never know the reason why the seller wants to sell but at least it made a profit from the deal, said Alex Wong, a director at Ample Finance Group.

Some traders were expecting Carlyle to offload part of its stake in China Pacific after the lock-up period for its investment expired last week. As a result, China Pacific's Hong Kong-listed shares rose 2.4 percent to HK$32.00 on Thursday, outpacing the Hang Seng Index <.HSI>.

The fact that the market absorbed such a big deal is a vote of confidence on China Pacific's prospects, Wong added. It has also removed one of the overhangs on the stock.

Carlyle declined comment, while China Pacific could not immediately be reached for comment. UBS AG , the sole arranger for the deal, also declined to comment.

The sources declined to be identified as the details of the sale were not made public.

China Pacific, the nation's third-largest life insurer, raised $2.04 billion through a Hong Kong initial public offering in December 2009. That paved the way for Carlyle to exit its investment, although it was restricted from selling any shares for a year from the listing.

Carlyle built its China Pacific stake over a series of investments. In late 2005, Carlyle and U.S. firm Prudential Financial Inc
jointly invested $410 million for a near-25 percent stake in the life insurance unit of China Pacific Group, beating off rival bidders including AIG , Citigroup and Singapore state investor Temasek .

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

(Additional reporting by Donny Kwok and Alison Leung; Editing by Chris Lewis and Muralikumar Anantharaman)