Agricultural Bank of China (AgBank), seeking to raise more than USD 23 billion in what would be the world's biggest initial public offering, said on Wednesday it will launch the Shanghai portion of its IPO this week, aiming to list on July 15.
The giant IPO is expected to stretch market liquidity, divert money away from stocks of rival banks and put other big listings on hold in a mainland market that has dropped more than 20% since the start of the year.
"The negative impact has been pretty much priced in but there will still be pressure on liquidity as well as on other banking shares," said Jin Lin, analyst at Orient Securities Co.
"Sentiment toward banks has been weak, given economic uncertainty and concerns over asset quality, but strong government backing will ensure a smooth listing for AgBank."
AgBank, the last of China's four big state banks to go public, is selling a 15% stake in a dual listing in Hong Kong and Shanghai, excluding a greenshoe option, to replenish its capital and fuel expansion, according to a prospectus published by the Shanghai Stock Exchange. The Shanghai IPO represents 46.7% of the deal.
CORNERSTONE INVESTORS
China's third-biggest lender by assets said up to 40% of the Shanghai offering, including the greenshoe option, would be placed with strategic investors, potentially easing investor concerns about whether demand would be sufficient to absorb all of the shares. AgBank did not name any of the investors.
AgBank will start premarketing to potential Chinese investors on Thursday and begin taking subscriptions on July 1, before setting the IPO price on July 7.
The Hong Kong portion of the bank's IPO was launched on Monday, seeking to raise up to USD 14.4 billion, including a 15% overallotment set aside for the greenshoe option, according to a term sheet obtained by Reuters.
The Hong Kong listing, expected one day after the Shanghai debut, has already signed up Asia's third- and fourth-richest individuals as cornerstone investors, according to a report.
"The next big concern is pricing," said Orient Securities' Jin. "If AgBank sets its IPO price too high, that would leave little room for gains on the secondary market and could bode ill for the whole market."
AgBank originally pushed a valuation that would have raised as much as USD 30 billion, but a drop in China's stock market, coupled with scrutiny of the bank's loan exposure, has tamped down estimates of the lender's worth.
The Beijing-based bank, founded in 1951 by Mao Zedong as the rural unit of the central bank, boasts nearly 24,000 branches and employs more than 441,000 people, eclipsing Industrial and Commercial Bank of China and China Construction Bank, the world's two biggest banks by market value.
If AgBank raises more than USD 23 billion as it hopes, it will be the world's largest ever IPO, beating out ICBC's USD 21.9 billion dual listing in 2006.
China Everbright Bank and Ningbo Port, which have long sought domestic listings, will likely see their mainland IPOs delayed further, analysts said, in a sluggish market where the benchmark Shanghai Composite Index has slipped of late to 13-month lows.
