Companies

Temasek offers $300m to invest in ABC July IPO

By Saeed Azhar and Michael Flaherty (China Daily)
Updated: 2010-06-14 10:21

SINGAPORE / HONG KONG - Singapore's state investment fund Temasek plans to invest up to $300 million in the Agricultural Bank of China (ABC) ahead of its roughly $20 billion initial public offering (IPO), a source with direct knowledge of the matter said.

Temasek's commitment to China's third largest bank is a positive step for the offering, although it is less than the $1 billion that ABC's underwriters are hoping to get from Middle East and Asian sovereign wealth fund cornerstone investors.

So-called cornerstone investors are a key layer of financial backing for an IPO. ABC's Shanghai-Hong Kong listing will be the world's largest ever IPO if it exceeds $21.9 billion.

Temasek declined to comment. ABC could not immediately be reached. The source was not authorized to speak on the record about the deal.

Reuters earlier reported that Temasek, and sovereign funds from Kuwait and Qatar were expected to sign on to ABC's offering.

ABC boasts nearly 24,000 branches and employs more than 441,000 people, eclipsing Industrial and Commercial Bank of China and China Construction Bank, the world's two biggest banks by market value.

If ABC raises more than the $23 billion it hopes, it will eclipse ICBC's $21.9 billion dual listing in 2006.

Special Coverage: Focus on ABC's IPO Related readings:  ABC to release prospectus on June 17: sources  ABC allots 35% of IPO to key investors  ABC to begin road show  Securities regulator reviews ABC's IPO plan  China Life to become ABC's strategic investor

ABC is China's third largest bank, with $1.4 trillion in assets. It also has 320 million customers, a base larger than the population of the United States.

Cornerstone investors agree to buy into an IPO before the pre-marketing period, allowing the underwriters to show potential institutional investors that the deal already has solid financial backing. In return, cornerstones receive preferential shares.

The sources say the IPO is expected to price on July 7, with a debut the following Thursday or Friday.

Normally, cornerstone investors are locked in for six months, but with the scale of ABC's IPO, underwriters are pushing for a one-year commitment, which will help add confidence to institutions seeking longer term returns from the offering.

The bank's top executives and Beijing officials are asking the underwriters to ensure that the stock trades up around 10 percent on its debut, important less for long term stability than a proud opening day triumph for a high-profile Chinese institution.

Reuters