SHANGHAI/HONG KONG (Reuters) - Agricultural Bank of China ABC.UL, preparing for what is expected to be the world’s largest-ever initial public offering, named the banks it chose for its more than $20 billion dual-listing, in a selection that included a few surprises.
While it’s unusual for a company to announce underwriters before the IPO prospectus, AgBank went ahead and identified the banks handling the long-awaited offering, which some experts think could raise nearly $30 billion.
The IPO, if successful, could generate more than $400 million in fees to be split among participating banks. With a 2 percent deal fee anticipated, a $30 billion IPO would generate around $600 million in fees, likely the largest-ever pool of money generated by an equity offering.
China’s fourth-largest bank said it had picked Goldman Sachs (GS.N), Morgan Stanley (MS.N), JPMorgan (JPM.N), China International Capital Corp (CICC), Deutsche Bank (DBKGn.DE) and Australia’s Macquarie (MQG.AX) to handle the H-share IPO in Hong Kong.
AgBank also said that CICC, Citic Securities (600030.SS), Galaxy Securities and Guotai Junan Securities would handle the A-share portion of the offering in Shanghai.
The AgBank release confirmed a Reuters report on Wednesday detailing the banks involved in the Shanghai A-share offering and the Hong Kong H-share listing.
AgBank is the only one among China’s big four state-run lenders that has yet to float shares and its IPO is expected to surpass the $22 billion that Industrial and Commercial Bank of China (ICBC) (1398.HK)(601398.SS) raised in its 2006 dual listing, a deal that remains the largest IPO ever done. ICBC is now the largest bank in the world by market capitalization and by assets.
The AgBank offering is widely expected to take place in the third quarter, sources involved in the IPO say.
AgBank is meeting with the selected banks on Thursday, known as a “kick off” meeting which will formally get the IPO process going.
Details on what specific roles all the banks will play are not yet known.
Investment banks in the region waited a long time for the AgBank mandate, given the size of the offering and the fee potential.
Among the surprises noted by banking sources in the aftermath of the AgBank selection process was the exclusion of UBS AG UBSN.VX, an equity powerhouse in the region, that was not named as an underwriter.
Sources told Reuters on Wednesday that UBS would be a financial adviser on the H-share portion, though that function typically involves a more minor role.
The inclusion of Macquarie was also noted, seeing as the Australian bank only began to ramp up its regional equity capital markets group in 2008.
While Credit SuisseVX> and Bank of America (BAC.N) do not have a role on AgBank, they are the only Western banks mandated for Bank of China’s upcoming $6 billion H-share placement.
Citigroup (C.N) does not have a role in either offering.
“The selected investment banks are highly reputable in domestic and overseas capital markets, highly experienced in helping big Chinese enterprises conduct IPOs and enjoy a long-term and friendly relationship with AgBank,” the Beijing-based lender said in a statement.
AgBank added that its investment banking unit in Hong Kong would also participate in the H share portion of the IPO.
Many of China’s big banks, including ICBC, Bank of China (3988.HK) (601988.SS) and Bank of Communications (3328.HK) (601328.SS) are tapping capital markets for funds after a government-directed lending spree last year depleted capital and fanned worries about bad loans.
AgBank is the only one among China’s “big four” banks that has no foreign shareholders ahead of its going public, having picked the country’s pension fund as its only strategic investor, the Economic News Daily reported on Wednesday, citing Vice President Pan Gongshen.
Additional reporting by Edmund Klamman