AgBank IPO expected to attract foreign investors

09:43, June 18, 2010      

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  Foreign financial institutions are likely to be the strategic investors for the Agricultural Bank of China's (AgBank's) upcoming initial public offering (IPO), which is expected to raise $17 to $23 billion.

  According to a prospectus filed by AgBank with the Shanghai Stock Exchange, the bank will issue 54.79 billion shares, including 22.24 billion A shares and 25.41 billion H shares, with an over-allotment option of 15 percent of the total shares.

  No more than 10.23 billion shares, or about 40 percent of the A shares, including the over-allotment, will be placed with strategic investors privately, and the remaining shares are to be subscribed by institutional and individual investors, AgBank stated.

  The bank starts bookbuilding today and will announce the final price July 8, but the it is expected to be about 2.5 yuan ($0.37) or even lower in currently bearish market. One of its underwriters said that it may tap Standard Chartered as a cornerstone investor.

  AgBank signed a strategic deal with Standard Chartered Thursday to collaborate on banking products and services both in China and internationally.

  "It's very likely StanChart will take a cornerstone stake in AgBank," said Alex Wong, director of asset management at Ample Finance. "There's a very good synergy. StanChart would bring the management efficiency to the partnership."

  Foreign financial institutions are rushing to become the strategic investors of AgBank in hopes of higher future returns, said Raymond Yung, financial services leader for PricewaterhouseCoopers China, at a press conference in Beijing Thursday .

  While many multinational banks are still reeling from the financial crisis, sovereign wealth funds and insurers still have enough capital to invest in AgBank, Yung said.

  AgBank is the last of China's "Big Four" banks to go public, and if the IPOs of the other three are any indication, foreign firms stand to make major profits from what is expected to be the largest offering in history.

  Many foreign financial institutions including Bank of America, HSBC, Goldman Sachs and Temasek became Chinesecommercial banks' cornerstone investors when they went public on the Chinese mainland and Hong Kong in 2005 and 2006. The foreign firms have seen massive returns as China's listed banks now top the global rankings.

Source: Global Times


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