Agricultural Bank of China is planning an IPO that could be the largest in the world so far, to the tune of $20-$30 billion, surpassing the previous highest IPO from VISA that amassed $19.7 billion in 2008. ABC is trying a listing at both the Shanghai and Hong Kong exchanges by the end of September.
Last year’s massive lending to the farmers, initiated by the Chinese government, depleted the coffers of ABC and hence it is planning to raise funds. The tranche of shares listed at Shanghai and Hong Kong would be equal in size, it was announced recently. ABC has been seeing potential investors for the bank’s shares and China Life Insurance Co. has evinced interest in subscribing to the proposed IPO. For long time now, people and investors have been waiting for ABC’s IPO.
One of the reasons for the delay in bringing the IPO may be the exercise of cleaning up of the mess created by huge lending to agriculture related business, which left the bank with massive NPA’s. This clean has been helped greatly by China’s sovereign wealth fund, which pumped $19 billion in the bank last November. Another reason for the delay in IPO could be the economic recession over the world economy.
Analysts feel ABC is trying to cash in on the cancelled IPO of American International Group’s Asian life insurance unit which had planned to raise $10-$20 billion from the market. Now, AIG has announced that it would sell the unit to Prudential.
ABC has given the names of top 10 investment banks which will underwrite the deal. China International capital Corp. will handle both the A and H share portions.
If Agricultural Bank of China’s IPO turns into a reality, it will send China to the top position of issuer of fresh shares this tear, with Japan with $24.8 billion raised with 146 share offerings, with Japan coming a distant second, having raised $11.5 billion with mainly the IPO of Daiichi Life Insurance Co.
In a related development, China Yuan Mining Ltd is trying to raise $522 million from its IPO in Hong Kong. However, Giti Tire Co. of China has cancelled its IPO to raise funds of $500 million.
The news of the world’s largest IPO comes when there are reports of Heng Seng falling continuously. With its share listing in the Shanghai and Hong Kong markets the process of fund raising would be complete.
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