World's Biggest IPO - Agricultural Bank of China

The Agriculture Bank of China on Wednesday earned regulatory approval for what might prove to be the world’s largest initial public offering. The world record is held by another Chinese bank, Industrial and Commercial Bank of China, which garnered $21.6 billion in an IPO in 2006.

ABC faces two challenges in its efforts to raise a large quantum of funds: a depressed market and low ratings by Fitch, which has allotted the lender its second lowest rating of “E”. But bank officials have assured potential investors that the public offering will not be delayed due to weak market situation, which is at a 13-month low. The offering is expected to take place late June or early July simultaneously in Shanghai and Hong Kong.

The China Securities Regulatory Commission made a brief announcement on Wednesday in its web site saying it had approved the IPO plan for the Beijing based ABC. The bank is the last of the "big four" state-owned banks to seek a share listing. It plans to sell a total of up to 53 billion shares. State-run newspapers have said trading on the shares will begin in mid-July.

It is not clear if the regulator is trying to use the IPO to pull up the market. The benchmark Shanghai Composite Index gained 2.8% closing at 2,583.87 after the announcement. ABC will issue shares worth 15 percent of its equity. It has chosen Goldman Sachs Group, JP Morgan Chase & Co., Macquarie Group Ltd., China International Capital Corp., and Deutsche Bank AG to run its IPO in Hong Kong. CICC and three other Chinese brokerages will advise on share sales in China. ABC has not yet set the IPO price but market sources said it was trying to raise between $23 billion and $30 billion.

It is a giant bank with 24,000 branches and more than 350 million customers enjoying a near monopoly in rural banking in China. Unlike the three other big state-run banks, ABC has not yet taken a foreign strategic partner.
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