HEARD ON THE STREET: AgBank's Eclectic Backers

23rd Jun 2010 11:01

By Peter Stein and Andrew Peaple A DOW JONES COLUMN What do a pair of Middle Eastern sovereign wealth funds, an Australian media company, and a Dutch bank have in common? They're all among an unlikely squad of cornerstone investors for the Hong Kong portion of Agricultural Bank of China's massive initial public offering. This is no joke. The lineup of investors - which includes the Qatar Investment Authority, Standard Chartered and Archer Daniels Midland - highlights just how much has changed since China's other major banks were floated some five years ago. Back then, China turned to foreign banks for credibility and long-term, strategic investment, letting the likes of Bank of America and Royal Bank of Scotland buy stakes at attractive discounts to the IPO price. That drew internal criticism that the state was giving away its crown jewels overseas. Some of the foreigners then made things worse by offloading their Chinese bank stakes at a still-decent profit when the subprime debt crisis wiped out their own balance sheets. This time around, China is marketing a less appealing bank --AgBank's legacy of bad loans was a messy affair to clean up-- but it's cutting no sweetheart deals: Foreign investors are paying the full price. Even so, there's no shortage of them, with each having motives besides making a hoped-for return on their investment. Middle Eastern investors are shifting their attention eastward, making up for lost time in terms of investing in China. Paving the way, sovereign funds from Qatar and Kuwait are taking the biggest positions in the AgBank offering, with $2.8 billion and $800 million respectively. Meanwhile, the investments from Standard Chartered, Dutch lender Rabobank, and Seven Group have been accompanied by cooperation agreements. Seven, once known only for its Australian television network, is now seeking to work with AgBank to expand its heavy-equipment business in China. All three will hope AgBank can help them extend their reach in an important growth market through its extensive branch network, the largest in China. ADM, the U.S. agribusiness giant, meanwhile, could also benefit from AgBank's huge reach in areas where its products - soybeans and the like -- will find their biggest demand. Everybody's got their angle to play. What these investors will do collectively, though, is see to it that the Hong Kong portion of the $20 billion to $30 billion deal gets away smoothly. With around 40% of the listing now backed by this international, eclectic bunch, much of the hard grind for AgBank is already out of the way. (Andrew Peaple, is a columnist on Dow Jones' Heard on the Street team. Currently based in Beijing he can be reached on +86-10-8400-7705, or by email on [email protected]. Peter Stein is the Hong Kong bureau chief for The Wall Street Journal. He can be reached at [email protected]). TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at [email protected]. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments. (END) Dow Jones Newswires June 23, 2010 06:01 ET (10:01 GMT)