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Agricultural Bank of China (AgBank) may raise $22 billion in record IPO

Agricultural Bank of China priced its Hong Kong and Shanghai dual listing on Tuesday, a deal that would break all IPO records by raising more than US$22 billion when adding in over-allotment shares.

The initial public offering (IPO), which is raising funds to replenish capital, still faces a tough aftermarket, with a debut planned for July 15 in Shanghai, and a day later in Hong Kong. It has fought through a plunging Chinese stock market and a euro zone debt crisis that has shaken other markets across the globe.

Despite the headwinds, China's third largest bank by assets was able to pull in strong demand for the IPO. AgBank, the last of China's big banking institutions to go public, has a sprawling network of branches in China's rural parts but also a presence in its major cities as well.

Only three years ago, AgBank, founded by Mao Zedong in 1951, was technically insolvent, with non-performing loans of around 24 per cent. Its turnaround, after a US$30 billion bailout and bad loan carve-out, underscores the strength of China's rapidly expanding economy and the state's tight grip on the banking industry.

Beijing-based AgBank sold 25.4 billion shares in Hong Kong at HK$3.20 (57 Singapore cents) each, compared with a recently narrowed range of HK$3.18 to HK$3.38, sources directly involved in the deal said on Tuesday. The original range was HK$2.88-HK$3.48. The lender priced its Shanghai IPO at the top of an indicated range, separate sources directly involved with the deal said.

AgBank will sell 22.24 billion yuan (S$4.56 billion)-denominated A-shares at 2.68 yuan apiece, after indicating a 2.52-2.68 yuan range. That means AgBank will raise a total of US$19.3 billion, but a greenshoe over-allotment of shares would expand the proceeds to US$22.2 billion.The sources could not be named because they were not authorised to speak publicly about the pricing ahead of an expected announcement on Wednesday. Given the strong institutional demand backing the deal so far, it is highly likely the greenshoe will be exercised, sources say, though no deal is complete until it debuts.

Source: Reuters
Date: 07.07.2010 [253]
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