UPDATE: Agricultural Bank of China To Raise Up To US$11.41B From HK IPO

23rd Jun 2010 18:04

(Adds background, advisers on the deal) By Yvonne Lee and Nisha Gopalan Of DOW JONES NEWSWIRES HONG KONG (Dow Jones)--Agricultural Bank of China Ltd. is raising up to US$11.41 billion from the Hong Kong portion of its initial public offering, two people familiar with the deal said Wednesday, moving a step closer to completing one of the world's biggest IPOs ever. The rural lender is selling 25.4 billion H shares, or 8% of the enlarged capital of the bank before an overallotment option is exercised, according to an IPO prospectus posted on the Shanghai stock exchange last week. The people said Wednesday, that the indicative price range for the Hong Kong listing has been set at a range of HK$2.88-HK$3.48 per share. This price range translates to a 2010 price-to-book multiple of between 1.55 and 1.79 times before an overallotment, or greenshoe, option is exercised. If the overallotment option is exercised, the price-to-book multiple would be at 1.53-1.76 times. That puts it below the valuations of the other Big Four banks in China, based on closing prices Wednesday and the book value at the end of March. Industrial & Commercial Bank of China Ltd. is trading at 1.97 times book, China Construction Bank at 1.93 times and Bank of China Ltd. at 1.66 times. ICBC raised a record US$22 billion in 2006 and is still the world's biggest IPO ever. Agricultural Bank's total IPO size won't be available until the pricing for the Shanghai listing is released, although that isn't available yet, the people said. According to the IPO prospectus, the bank will sell up to 29.22 billion shares in Hong Kong including the overallotment option. AgBank is also selling 22.24 billion yuan-denominated A shares in Shanghai. In total, the bank will offer 47.6 billion shares for its Hong Kong and Shanghai listings, before the overallotment option is exercised. The pricing of the A shares for the Shanghai listing isn't yet available, but if the A shares are listed at the same level as the H shares, in total, the IPO, before the overallotment option is exercised, could raise US$21.24 billion. For the H-share tranche, AgBank has attracted about $5.45 billion from cornerstone investors, people familiar with the situation said earlier. Two Middle Eastern funds have agreed to buy the largest share of the offering, with Qatar Investment Authority subscribing to $2.8 billion of shares and Kuwait Investment Authority opting for $800 million. After the two Middle Eastern funds, U.K.-based Standard Chartered PLC (STAN.LN) will be the next biggest investor in AgBank's offering, agreeing to buy $500 million of the Hong Kong-listed shares, three people familiar with the deal said earlier. Temasek Holdings Pte. Ltd, Dutch financial-services firm Rabobank, Australia's Seven Group Holdings Ltd. (SVW.AU) a company controlled by billionaire Kerry Stokes with interests in media and heavy equipment, Archer Daniels Midland Co. (ADM), the U.S. agribusiness group, Singapore's United Overseas Bank Ltd. (U11.SG) and Hong Kong billionaire Li Ka-shing are also cornerstone investors. Two Chinese state-owned firms, China Travel Services Group, and consumer group China Resources (Holdings) Co. are also buying into the IPO in Hong Kong. AgBank will kick off the roadshow for the Hong Kong IPO Thursday, two people said, with the Hong Kong listing slated for July 16, and the Shanghai listing a day earlier. The bank started the roadshow for the Shanghai listing on Friday last week. Cornerstone investors agree to buy a stake at the IPO price and not sell shares for six to 12 months, as opposed to pre-IPO strategic investors that invest at a predetermined level, according people familiar with the situation. China's pension fund is the bank's sole strategic investor, having bought shares before the IPO was launched. In the prospectus issued earlier this month, AgBank said the pension fund owns a 3.7% stake in the bank, and China's sovereign-wealth fund and Ministry of Finance the remainder. AgBank has long been considered the weakest of China's big banks with a bigger legacy of bad loans that delayed its coming to market. But as the last of China's Big Four banks to list, it offers a rare opportunity for those investors still willing to bet on China's long-term growth. AgBank announced a group of 10 investment banks to underwrite the deal in April, among which China International Capital Corp. will handle both the A- and H-share portions. Morgan Stanley (MS), Goldman Sachs Group Inc. (GS), J.P. Morgan Chase & Co. (JPM), Deutsche Bank AG (DB), Macquarie Group Ltd. (MQBKY) and Agricultural Bank's wholly-owned investment banking unit, ABC International Holdings Ltd., are the other underwriters for the H-share offering. Citigroup Inc. (C) is a co-lead manager on the Hong Kong IPO. Citic Securities Co. (600030.SH), Guotai Junan Securities Co. and China Galaxy Securities Co. are the other underwriters for the A-share offering in China. -By Yvonne Lee and Nisha Gopalan, Dow Jones Newswires; 852 2583 2335; [email protected] (Rose Yu contributed to this article.) (END) Dow Jones Newswires June 23, 2010 13:04 ET (17:04 GMT)