Chinese bank in $11b float

HONG KONG - China Construction Bank, the nation's third-largest lender, plans to seek as much as HK$59.6 billion ($11 billion) in the world's biggest initial public offering in more than four years, say people involved in the company's sale.

The bank will offer 26.49 billion shares, or 12 per cent of its enlarged share capital, at HK$1.80 to HK$2.25 each, sources said. The price range, confirmed in an email sent by an underwriter to investors, may be lowered pending discussions with the Beijing-based bank's executives, said the sources.

Construction Bank has 3.7 times as many assets as Bank of Communications, the only Chinese lender to previously sell stock overseas. The size of the bank, which drew investments from Bank of America and Temasek Holdings before the IPO, would probably lure investors, said Tim Leung, at IG Investment Management in Hong Kong.

"It's good timing as the fund flows are very strong, boosting appetite for big offers," he said. "Its sheer size may attract investors who benchmark against the MSCI."

More than US$3 trillion of funds worldwide are benchmarked to Morgan Stanley Capital International indexes. Managers who follow the indexes typically mimic changes made to them.

At HK$2.25 a share, Construction Bank would have a market value of about US$64 billion, similar to that of American Express or Barclays.

Bank of America, the second-biggest US bank, agreed in June to pay US$3 billion for 9 per cent of Construction Bank, including US$500 million in the IPO itself.

Temasek, the Singapore Government's investment arm, bought 5.1 per cent of Construction Bank's shares before the IPO and agreed to invest US$1 billion in the share sale.

Bank of America agreed to hold its shares for three years, and Temasek for one year, sources said.

The Construction Bank IPO will be the biggest in Asia since a 2.13 trillion ($27 billion) offering in 1998 by NTT DoCoMo, Japan's largest cellphone maker. It is the world's largest initial share sale since Kraft Foods raised US$8.7 billion in June 2001.

Construction Bank is the first of the "big four" state-owned banks in China seeking an overseas listing, beating larger rivals Industrial & Commercial Bank of China and Bank of China, which are planning offerings next year.

- BLOOMBERG