Agbank gears up for world’s largest IPO

City A.M. Reporter
THE Agricultural Bank of China (Agbank) has been given the go-ahead by Chinese regulators for what could be the world’s largest share flotation.

Agbank is planning to sell a stake of 14 per cent in a dual listing that will see its shares join both the Shanghai and Hong Kong stock exchanges.

The listing is expected to raise at least $17.6bn (£12.2bn), but could reach as high as $30bn, say analysts.

The current record amount raised in a share flotation is $21.9bn.

This was set in 2006 by fellow Chinese lender Industrial & Commercial Bank of China.

Sovereign funds, including China Investment Corp, Qatar, Kuwait and Temasek, are seen as likely buyers of pre-IPO stakes in AgBank, along with Dutch group Rabobank, which just signed China’s third-largest lender.

AgBank is pushing for a valuation of 1.6 price to book, which would place the size of its IPO at about $23bn to $25bn, around $5bn to $7bn less than it originally hoped.

The eventual size of the offering, however, is anyone’s guess at the moment, as the company has yet to go on its roadshow to potential investors, and yet to release the formal prospectus.

The so-called cornerstone investors are expected to be signed this week, ahead of Monday’s premarketing period, with sources saying that such buyers could take as much as 40 per cent of the Hong Kong offering – roughly one-third more than is typical. That surplus can be attributed to the size of the offering and the difficulty it is facing in a down market.

It is widely expected that AgBank will get the okay from Hong Kong’s listing committee today. If so, the lender will start pre-marketing on 14 June and kick off the formal marketing roadshow on 24 June. AgBank plans to list in Shanghai on 15 July and in Hong Kong on 16 July.

Yesterday’s listing approval, while largely procedural, brought a degree of certainty back to AgBank’s fundraising plans, after local media cast doubt on whether it would move ahead as planned in the next few weeks.

A senior Agbank executive dismissed reports that AgBank’s state shareholders were pushing it to postpone its fundraising plans due to the relatively weak market conditions.