(Reuters) – Agricultural Bank of China ABC.UL said on Monday that it had attracted subscriptions from big insurers and other major companies for the Shanghai portion of its initial public offering, helping to ensure that the issuance would not cause disruptions to local markets.
AgBank’s roughly $20 billion Hong Kong-Shanghai IPO has hung over the Shanghai stock market in past weeks, as investors worry that an influx of additional shares could keep the overall market — one of the world’s worst performers this year — from having a chance of reviving any time soon. .SS
AgBank President Zhang Yun sought to ease such concerns in an “online roadshow” on Monday, answering questions posed by retail investors in an online chat.
Up to 10.2 billion yuan-denominated shares will be sold via a placement to strategic investors, including top insurers, agricultural firms and other major companies, Zhang said, accounting for nearly half the overall A-shares on offer.
That meant that, even if the offer is priced at the top of the price range for the A-share offering of 2.52-2.68 yuan ($0.37-$0.40) per share, the overall offering would not be too big, Zhang said.
“The market should have adequate ability to handle the offering,” he said.
Zhou Qingyu, head of AgBank’s agriculture-related business, added that while the IPO would raise enough capital to support rapid growth over the next three years, it could turn again to capital markets down the road.
“We will also consider external fundraising if conditions are beneficial and allow us to do so. The tools include issuance of common shares, convertible bonds and subordinated bonds,” Zhou said.
AgBank President Zhang did not name the firms that would be participating as strategic investors, but indicated that the country’s third-biggest bank by assets was seeking investors that would help it stick to its roots as a lender focused on the vast countryside.
Sources familiar with the deal told Reuters earlier that institutional investors for the A-share portion would include China Life Insurance Co (2628.HK) (601628.SS). Petrochina (601857.SS) was also expected to participate.
“These companies have leading positions in their industries, such as major insurance companies, leading enterprises, and leading agriculture-related companies,” Zhang said.
“These companies … would help lift AgBank’s corporate value, improve corporate governance, and play an important role in helping generate shareholder returns,” he said.
Half the stakes bought by strategic investors will be locked up for one year, and the remainder has to be held for at least 18 months.
AgBank, the last of China’s “big four” banks to go public, is selling shares in Shanghai and Hong Kong to raise as much as $23 billion in what could be the world’s biggest IPO, as the lender seeks to replenish capital and drive growth.
If AgBank’s offering is priced toward the top of an indicated range, and a greenshoe option is exercised to expand the offering by 15 percent, the IPO will become the world’s biggest ever, exceeding Industrial & Commercial Bank of China’s (1398.HK) (601398.SS) $21.9 billion offering in 2006.
AgBank is expected to price the Hong Kong portion of its IPO on Tuesday and the Shanghai portion on Wednesday.
The Hong Kong portion of AgBank’s IPO was 10 times oversubscribed by institutional investors during the first week of bookbuilding.
Cornerstone investors have already taken up $5.45 billion of the Hong Kong portion of the IPO, leaving a relatively small portion for other investors.
They include Asia-focused bank Standard Chartered Plc (STAN.L), the Qatar and Kuwaiti sovereign wealth funds, Rabobank RABO.UL and Temasek Holdings TEM.UL.
(Editing by Jacqueline Wong)