Chinese IPO may be world's biggest

BEIJING - Agricultural Bank of China is raising at least US$19.2 billion ($27.7 billion) in what may become the world's biggest initial public offering.

China's largest lender priced its Hong Kong shares at HK$3.20 apiece yesterday after the stock was offered for HK$2.88 to HK$3.48. The Beijing- based company is selling 22.2 billion shares in Shanghai at 2.68 yuan each, the top of its range.

Chairman Xiang Junbo has overcome a stock market rout that drove the Shanghai Composite Index to a 15-month low this week and led companies to shelve almost 50 IPOs worldwide in the past three months.

The lender can expand the sale to US$22.1 billion using an over-subscription option, allowing it to surpass Industrial & Commercial Bank of China's US$21.9 billion IPO in 2006.

"Given market conditions, they should be pleased" with the pricing, said Uri Landesman, president of New York-based hedge fund Platinum Partners. "It sends out a mildly reassuring message about how global investors feel about the market in general and the greater China area in particular."

Agricultural Bank also had to contend with concern that a real estate slump in China may cause delinquent debts to surge, curbing earnings at banks after they extended a record US$1.4 trillion of new loans last year.

Kenneth Rogoff, the Harvard University professor and former chief economist of the International Monetary Fund, said on Tuesday that China's property market was beginning a "collapse" that would hit the nation's banking system.

Agricultural Bank is selling a 15 per cent stake before the over-subscription. The IPO values the company at US$126 billion, making it the world's eighth-largest lender.

The pricing is "impressive just given the economic picture, the recent IPO market and some of the concerns coming out of China and the property market," said Timothy Cunningham at Thornburg Investment Management. "When you get deals that are this large, it takes a lot of demand to move that stock."

Xiang lured investors from Qatar's sovereign wealth fund to Standard Chartered to help support the offering.

Set up in 1951 by Mao Zedong, Agricultural Bank was the first Chinese commercial lender established during Communist rule.

It was the last major state bank to go through restructuring, receiving a bailout valued at about US$139 billion in 2008.

It has 320 million customers and 23,624 outlets and made a record 1 trillion yuan of new loans last year, more than the GDP of New Zealand.

- BLOOMBERG