Chillin' out till it needs to be funded
Fueled by the $1.5 T in loans in 2009, China’s Banks, led by its own Big 4 are out to raise $100bn from the world’s fastest drying markets, the primary capital raising markets across the world. With choice of high quality global equity and a deadbeat debt markets, IPOs have become a test of brute brand strength, the underwriters you keep and the time you share with the media and the bigger investors. In the fourth or fifth such issue above $5 billion, ABC is going farther than the all time mark set by ICBC issuing 25.4 bn shares in Hong Kong with a 4bn green shoe and an equal amount in Shanghai.
According to current plans for the issue opening this week, the last of the big 4 from China is still hoping to leave its mark in these extreme conditions, with a 40-50% premium over its Book Value [post-issue] of CNY 1.6 or $ 0 and 23.5 cents at HKD 1.1-1.2. They are likely to mark lower to make sure the market is left with an appetite. The Agricultural Bank of China has been variously pulled up for its largely legacy SME clientele[TVE-Town and village enterprises] and high non performing loans and feted for its access to upcoming urban governments. A lot of new urban centers including one in Shanghai are being planned as Financial District Centers.
If cornerstone investors pick up the top third of the issue, likely value of this 15-18% stake will start the upward climb after a dull one year or so.
Last week’s BW report noted:
Agricultural Bank will compete for investors’ money with publicly traded rivals that plan to raise a combined $32 billion in stock and bond sales even with bank valuations near record low levels. The offering also comes as the government cracks down on real-estate speculation and Europe’s debt crisis threatens to slow China’s exports, while spurring companies from Hong Kong to Moscow and New York to postpone IPOs.
“Agricultural Bank has to sell what’s so special about itself because the number of shares it’s offering to the market is huge and investors have many banks to choose from,” said Deng Yongming, who helps oversee about $320 million at Changsheng Fund Management Co. in Beijing. “The global and domestic economic picture isn’t rosy either.”
WSJ’s report notes(and they do rank behind us):
The deal comes at a choppy time for markets, with weak appetite for new deals forcing some IPOs to be pulled and while China’s banks plan to raise around $70 billion in coming months to replenish their capital after a lending binge last year.
In a sign that investor appetite for Chinese listings is waning, Chinese wind-turbine maker Xinjiang Goldwind Science & Technology Co. shelved its US$1.2 billion IPO this weekend.
China’s pension fund is the bank’s sole strategic investor, having bought shares before the IPO was launched. In the prospectus issued last week, AgBank said the pension fund owns a 3.7% stake in the bank, and China’s sovereign-wealth fund and the Ministry of Finance the remainder.
AgBank announced a group of 10 investment banks to underwrite the deal in April, among which China International Capital Corp. will handle both the A- and H-share portions.
Morgan Stanley, Goldman Sachs Group Inc., J.P. Morgan Chase & Co., Deutsche Bank AG, Macquarie Group Ltd. and Agricultural Bank’s wholly owned investment banking unit, ABC International Holdings Ltd., are the other underwriters for the H-share offering. Citigroup Inc. is a co-lead manager on the Hong Kong IPO.
Citic Securities Co., Guotai Junan Securities Co. and China Galaxy Securities Co. are the other underwriters for the A-share offering in China.