* Offer revises down valuation to $15.4 bln-$18.2 bln
* 17 cornerstone investors pledge $1.85 bln toward IPO
* AIG, State Grid, Sinomach among investors
* Offer set to be priced on Nov. 30
By Elzio Barreto and Fiona Lau
HONG KONG, Nov 21 Chinese state-owned insurer
PICC Group has secured pledges from American International Group
(AIG) and other investors to buy about half of its up to
$3.6 billion IPO, set to be the biggest in Hong Kong in two
The long-awaited offering is set to be priced on Nov. 30.
Underwriters have revised down the company valuation and the IPO
size, sources with direct knowledge of the deal said,
underscoring the tough environment for fundraising and PICC's
need to boost its capital base to support business growth.
People's Insurance Company (Group) of China (PICC), one of
China's largest insurers, is tapping the Hong Kong equity market
at a time when IPO volumes in the financial centre have tumbled
more than 80 percent. PICC will be the biggest Hong Kong IPO
since another insurer, AIA Group Ltd, raised $20.5
billion in 2010.
The company secured $1.85 billion in commitments from 17
cornerstone investors as varied as Chinese utility State Grid
Corp, the country's leading gold miner Zijin Mining
Group, defence contractor Spacechina and
China Life Insurance Co Ltd , the sources
So-called cornerstone investments in IPOs are unique to
Asia, where large and well-established investors are guaranteed
big allotments in return for holding their shares for a certain
period of time, giving investors confidence in the deal.
U.S. insurer AIG was added to the list of cornerstone
investors who initially signed up, pledging $500 million to the
IPO, sources said. It was unclear what caused the delay, but one
source had earlier said AIG had dropped out due to valuation
issues. AIG was not immediately available for comment.
The list is still subject to last minute changes, sources
"The seller (PICC) is pushing the envelope on valuations,"
one of the sources added.
French reinsurer Scor and Tokio Marine Holdings
are among the global companies who have committed to
buy PICC shares. Scor could not be reached immediately for
comment. A Tokio Marine spokesman declined to comment.
$18 BLN COMPANY
The price range for the IPO was set at HK$3.43-HK$4.03 per
share, valuing PICC at 96 billion yuan to 113.2 billion yuan
($15.4 billion to $18.2 billion) before the IPO, Thomson Reuters
publication IFR reported, citing four sources familiar with the
That is lower than the 130 billion yuan valuation initially
sought, IFR added.
PICC is offering 6.9 billion primary shares, or 16.7 percent
of its enlarged capital, aiming to raise 19.18 billion yuan to
22.6 billion yuan.
A record 17 banks have been roped in to sell the offer,
which is being marketed to global institutions.
IFR previously reported the IPO had been expected to value
PICC at $20.8 billion to $30.5 billion, or at 2-2.5 times the
2013 price to book value and at a 2013 price to earnings ratio
of 10.5-15, according to pre-deal research reports.
Asian insurers on average trade at around 15.9 times forward
price to earnings, Thomson Reuters data shows.
PICC's listing comes at a time when the volume of new
offerings in Hong Kong has plunged, with IPO activity likely to
shrink to its lowest since 2008 as investors shun new deals due
to volatility caused by Europe's debt troubles.
Overall issuance in the city is little changed so far in
2012 from 2011 at about $38 billion, but the year has been a
dismal one for IPOs, down more than 80 percent, according to
Thomson Reuters data.
Most of the activity has been from so-called block deals
that target institutional investors, including a $6 billion
offering of AIA stock in March and a $2.5 billion sale of
Industrial and Commercial Bank of China shares in
PICC and companies including Future Land Development
Holdings Ltd will test investors' appetite for IPOs in coming
weeks with nearly $5.2 billion of deals.
Founded in 1949, PICC is China's first nationwide insurer
and has 2.42 million institutional insurance clients and about
130 million individual insurance customers, more than the entire
population of Japan.
The company is controlled by China's Ministry of Finance,
which has an 88.7 percent stake, while the National Social
Security Fund holds the remainder.
China International Capital Corp (CICC), Credit Suisse Group
AG, Goldman Sachs Group Inc and HSBC Holdings
Plc won mandates as sponsors of the deal.
The list of banks also helping to underwrite the IPO
includes Bank of America Merrill Lynch, Morgan Stanley
and UBS AG, as well Chinese firms such as ABC
International and BOC International.