UPDATE 1-China's AgBank selects banks for $20 bln IPO-sources

Wed Apr 14, 2010 8:00am EDT

* AgBank IPO could exceed $20 bln and become largest ever

* Banks involved eligible for more than $400 mln in fees

* A-share offering favours CICC, CITIC, Galaxy - sources

* Deutsche, Goldman, Macquarie, Morgan on H-share-sources

(Adds details, background, byline)

By Kennix Chim and Michael Flaherty

HONG KONG, April 14 (Reuters) - Agricultural Bank of China (AgBank) [ABC.UL] has chosen the roster of banks to handle its IPO, sources with direct knowledge of the matter said on Wednesday, an offering expected to raise more than $20 billion.

A "kick off" meeting for the initial public offering of the country's fourth-largest lender is expected to begin on Thursday, the sources said. If successful the IPO could be the world's largest ever, generating more than $400 million in fees to be split among participating banks.

CICC, Citic Securities, Galaxy and Guotai Junan Securities were handling the Shanghai exchange A-share portion of the offering, according to the sources. Haitong Securities and China Merchants Securities were the financial advisers.

CAF Securities, CICC, Deutsche Bank (DBKGn.DE), Goldman Sachs (GS.N), Macquarie MQG.N and Morgan Stanley (MS.N) were handling the Hong Kong exchange H-share portion of the offering. JP Morgan (JPM.N) was also said to be involved in the offering, sources said. CAF Securities is AgBank's securities division.

UBS (UBSN.VX) and Citic Securities were the financial advisers for the H-share offering, the sources said.

Sources said the various roles and the banks involved could change at the last minute, though with Thursday's kick off meeting close at hand, few changes were expected.

AgBank could not immediately be reached for comment. All banks mentioned in the story were either not immediately available or declined to comment.

More than 10 sources with direct knowledge of the offering were contacted for this story. None wanted to be identified because the AgBank IPO mandates were not yet public.

LARGEST EVER

The deal may surpass Industrial and Commercial Bank of China (1398.HK) (601398.SS), which raised $22 billion through a Hong Kong and Shanghai IPO in 2006, becoming the ever largest IPO in the world.

Chinese banks have since grown to rank among the largest in the world by market capitalisation and by assets. AgBank has 7.01 trillion yuan ($1 trillion) in assets.

AgBank picked the country's pension fund as its only strategic investor ahead of its IPO, the Economic News Daily reported on Wednesday, citing Vice President Pan Gongshen.

The move will make AgBank the only one among China's "big four" banks not to have foreign strategic investment before going public, underscoring decreased reliance on overseas investors by China's banking sector, the newspaper said.

Dai Xianglong, chairman of the National Council for Social Security Fund, said the pension fund would invest at least 15 billion yuan ($2.2 billion) in AgBank, the article said.

Many of China's big banks are tapping debt and equity markets for funds, after a lending spree last year to support Beijing's economic stimulus left their capital ratios under pressure and fanned worries about bad loans.

Bank of China (3988.HK) (601988.SS), the country's third-largest lender, said it wants to issue more shares in Hong Kong, expecting to raise about $6 billion to $7 billion that could strengthen its balance sheet. The bank also plans to issue a 40 billion yuan ($5.9 billion) A-share convertible bond.

Bank of Communications (3328.HK)(601328.SS), China's fifth-largest lender, also plans a $6.1 billion rights issue. (Additional reporting by Denny Thomas, Fiona Lau and Wei Gu, with Michael Wei and Xie Heng in Beijing; Editing by Chris Lewis and David Holmes)

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