The Agricultural Bank of China (AgBank, 中國農業銀行) is seeking to raise more than US$23 billion through a dual Hong Kong and Shanghai listing, according to documents yesterday, putting it on course for the world’s biggest IPO.
The initial public offering by AgBank, founded by Mao Zedong (毛澤東) in the 1950s as the central bank’s rural arm, had previously been touted as high as US$30 billion, but has been scaled back as China’s stock markets have dropped by more than a fifth this year and global markets have been spooked by a euro zone debt crisis.
Over the weekend, China’s second-largest wind turbine maker, Xinjiang Goldwind Science & Technology Co (新疆金風科技), pulled its US$1.2 billion IPO, the fifth Hong Kong offering to be shelved since last month
The market downturn has put paid to around US$3.8 billion in public offerings on the Hong Kong Stock Exchange in recent weeks.
The Hong Kong portion of the AgBank offering sought to raise up to US$14.4 billion — a figure that includes a 15 percent overallotment set aside for the after-market, according to a term sheet obtained by reporters yesterday.
The total amount AgBank is looking to raise, including its Shanghai A-share offering and the overallotment, is up to US$27.2 billion, based on a prospectus filed to Chinese regulators, which said the Hong Kong offer would be 53 percent of the total deal.
Equity capital markets value an IPO based on the actual offering and not the overallotment, which is not finalized until after the offering first trades.
The previous biggest IPO was the US$22 billion raised by Industrial and Commercial Bank of China (ICBC, 中國工商銀行) in 2006.
Antonny Cheng, managing director at Gain Asset Management Ltd (建益資產), said he does not expect to invest in AgBank.
“It’s the weakest among the big four state banks in terms of loan quality,” he said, adding there are other high quality firms with cheap valuations at the moment given the fall in China’s stock markets.
Supporters of AgBank say it has cleaned up its books and its growth potential is higher than other Chinese lenders.
Singapore’s state investment fund Temasek plans to invest up to US$300 million in the IPO, a source with direct knowledge of the matter said on Saturday, and other Middle East and Asian wealth funds are also expected to step in as cornerstone investors.
The Hong Kong H-share offering is set for a July 16 debut, the term sheet said. The institutional portion will be 95 percent, with 5 percent reserved for retail investors.
A separate term sheet distributed by broker CLSA said that retail portion could be increased depending on demand.
AgBank will use the IPO proceeds to strengthen its capital base and support the growth in its business. The Beijing-based bank is best known for its customer base that spreads across China’s far-flung parts, though it does have a major presence in most of the country’s major cities.
AgBank today boasts nearly 24,000 branches and employs more than 441,000 people, eclipsing ICBC and China Construction Bank (中國建設銀行), the world’s two biggest banks by market value.
AgBank is China’s third largest bank, with US$1.4 trillion in assets. It has 320 million customers.
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