UPDATE: Qatar Investment Authority To Invest US$2.8 Bln In AgBank HK IPO - Source

21st Jun 2010 10:54

(Updates with other cornerstone investors, listing details and background) By Nisha Gopalan Of DOW JONES NEWSWIRES HONG KONG (Dow Jones)--Middle Eastern sovereign wealth fund Qatar Investment Authority will be the single largest cornerstone investor in the Hong Kong portion of the US$20 billion-US$30 billion initial public offering by Agricultural Bank of China Ltd. with US$2.8 billion, one person familiar with the deal said Monday. Kuwait Investment Authority and Standard Chartered PLC (STAN.LN) will also be among the top investors, adding US$500 million-US$1 billion and around US$500 million respectively, the person said. Other cornerstone investors will invest "around the US$200 million figure, either more or less", the person said. In an effort to ensure the deal, set to be the biggest IPO globally for years, is successful, AgBank is in talks to lock in cornerstone investors for around 40% of the Hong Kong shares being sold to institutional investors, two people familiar with the deal said earlier. The bank plans to sell 95% of the US$10 billion-US$15 billion it intends to raise from the Hong Kong portion of its IPO, according to the pre-marketing, or investor education, term sheet released last week, to institutional investors and the rest to the Hong Kong retail public. That means cornerstone investors in the Hong Kong tranche will take up in total between around US$4 billion and US$6 billion. Even as volatile markets and a spate of capital-raisings by Chinese banks cast a pall on AgBank's ability to price at the higher end of its fund-raising goal, its ability to lock in Middle Eastern funds that will take up to half the allotment for cornerstone investors in the Hong Kong IPO should help the listing succeed. The Middle East and China have been building closer ties in recent years. The person said Qatar Investment Authority has signed a document to buy US$2.8 billion worth of shares in the rural lender, which plans to list in both Hong Kong and Shanghai next month. Representatives at Qatar Investment Authority and Kuwait Investment Authority couldn't be immediately reached for comment. Standard Chartered said it looks at many opportunities but cannot comment specifically on future investments. "But we are looking forward to building a strong working relationship with ABC," it said. Standard Chartered, which has a strong Asia presence, last week signed a memorandum of understanding with AgBank. The two sides will collaborate on retail and wholesale banking products and services both within China and internationally, with Hong Kong likely a pilot region for the cooperation. Adding to the list of cornerstone investors on the Hong Kong IPO are Dutch financial-services company Rabobank, Singapore state investment company Temasek Holdings Pte. Ltd.; and Hong Kong billionaire Li Ka-shing, people familiar with the situation said Monday. Rabobank has said it would invest $100 million-$200 million for a roughly 0.5% stake in the AgBank. The Dutch financial group announced a strategic partnership deal with AgBank three weeks ago, with plans to cooperate in wholesale banking, rural finance and asset management. Temasek will contribute around $200 million to the IPO, a person familiar with the matter said earlier. 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 road show for the Shanghai listing Friday, indicating its determination to list as soon as possible despite still-volatile capital markets. 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 Nisha Gopalan, Dow Jones Newswires; 852 2583 2335; [email protected] (END) Dow Jones Newswires June 21, 2010 05:54 ET (09:54 GMT)