The Agricultural Bank of China (AgBank, 農業銀行) kicks off its highly anticipated initial public offering (IPO) this week in what is expected to be the world’s largest IPO, propelled by big interest from heavyweight investors.
Eleven so-called cornerstone investors — including Qatar’s sovereign investment fund, British bank Standard Chartered and Hong Kong’s richest tycoon, Li Ka-shing (李嘉誠) — are pouring money into the massive sale, which is expected to fetch as much as US$24 billion ahead of the bank’s trading debut in Hong Kong and Shanghai next month.
Estimates for the IPO — which starts tomorrow — have ranged from about US$19 billion to US$30 billion as market volatility left a key question mark over the sale’s chances of smashing previous records.
Many observers expect AgBank — the last of China’s big four lenders to list its shares — to overtake the US$22 billion offering by Industrial and Commercial Bank of China (ICBC, 中國工商銀行) in 2006, currently the world’s largest.
But there has been speculation that the size of AgBank’s share sale would be smaller than anticipated because of weak market sentiment and concerns over the profitability of its operations.
Some analysts consider the rural lender to be the weakest of China’s big banks owing mainly to its bad-loan burden.
But price-to-book value estimates based on a share price range for the Hong Kong portion of the sale make AgBank a cheaper buy than China Construction Bank (中國建設銀行) and ICBC, and on a par with Bank of China (中國銀行), Dow Jones Newswires reported.
Investor optimism that markets may have bottomed out could also help the sale, said Aaron Boesky, chief executive of China-focused hedge fund Marco Polo Investments (馬可孛羅投資).
“Retail interest should surprise on the upside, based on cheap pricing and current perceptions regarding a bottom in the market,” he told Dow Jones.
The size of the cornerstone investors’ commitment — about US$5.45 billion — combined with heavy interest from retail investors could make it tough for some institutional buyers to get their hands on a worthwhile chunk of the offering, Boesky added.
“There will be little room for the mid- and small-size managers, which is shocking considering the size of the listing,” he was quoted as saying.
The sale’s other cornerstone investors reportedly include Dutch financial-services firm Rabobank, Singapore state investment company Temasek Holdings, Australia’s Seven Group Holdings, the Kuwait Investment Authority, US food giant Archer Daniels Midland, United Overseas Bank, tourism monopoly China Travel Services Group (中國旅行社) and state-run consumer group China Resources (Holdings) (華潤集團).
The sale comes after Hong Kong’s bourse, faced with growing competition from Shanghai in recent years, claimed top spot as the world’s largest IPO market last year, raising almost US$32 billion.
But market volatility has also seen several companies shelve their Hong Kong IPOs in the past two months.
Swire Properties (太古地產), a major real estate developer in the territory, pulled a planned US$3.09 billion share sale last month, just two days after Giti Tire (佳通輪胎), China’s largest tire maker, shelved a US$500 million IPO.