The Rising Influence of Rising Affluence

[DewDiligence]

AgBank IPO Raises $19-22B, Possibly Largest Ever

http://online.wsj.com/article/SB10001424052748704862404575350881947408868.html

›JULY 6, 2010, 12:58 P.M. ET
By ALISON TUDOR

HONG KONG—Agricultural Bank of China Ltd., the last of China's four big banks to go public, raised US$19.21 billion in Hong Kong and Shanghai and is still in the running to pull off the biggest initial public offering ever.

AgBank and its advisors set the price for the Hong Kong portion of its IPO at 3.20 Hong Kong dollars (41 U.S. cents) apiece, near the middle of the indicative range, people familiar with the matter said. In Shanghai, its shares were priced at 2.68 yuan (about 40 U.S. cents), at the top end of the range, they said.

That means China's fourth-largest lender by assets could raise $22.1 billion if both overallotment options are exercised, besting its peer, Industrial & Commercial Bank of China Ltd. ICBC's $21.9 billion IPO in 2006 is the world's largest to date.

The ability to execute the deal despite rocky markets illustrates investors' faith in China's growth story. Global investors view Chinese banks as one of the best ways to gain exposure to the world's fastest-growing major economy. It also highlights China's growing importance on international capital markets.

During the past decade, the country's top lenders have turned to global markets to become more market-oriented, to improve transparency and disclosure, and to fortify their capital bases.

"AgBank, once listed, can benchmark itself much more easily against global peers. The market imposes discipline," said Hweejan Ng, a Singapore-based analyst who covers Chinese banks at U.S. asset manager T. Rowe Price Group Inc.

Even so, the offering falls short of its US$23 billion target, which in turn was well below the $30 billion top amount that the bank was pushing to raise just weeks ago.

AgBank's price in Hong Kong amounts to about 1.6 times book value, the people said. That places it below ICBC and China Construction Bank Corp., which both trade about two times book value, but above the 1.5 times for Bank of China Ltd .

The Hong Kong shares had an indicative price range of HK$2.88 to HK$3.48 a share. AgBank sold 25.4 billion of these so-called H shares, totalling HK$81.28 billion, or US$10.43 billion. That is equal to 8% of its enlarged share capital, before any use of the overallotment option.‹