Bank of China, the country's second-largest lender,
raised $9.7 billion after pricing its initial public offering near the top
of its indicated range in the world's biggest stock offering since 2000,
underwriter UBS said on Wednesday.
The heavily oversubscribed offering, which investors view as a means to tap
China's surging economic growth, will expand to $11.1 billion after the exercise
of an over-allotment option, sources familiar with the deal said.
Investors wait to apply for the initial public
offering of Bank of China before the deadline in Hong Kong May 23, 2006.
Bank of China is expected to price its IPO, worth up to $9.8 billion, at
or near the top of its indicated range, but turbulent global markets could
have curbed retail oversubscription levels.
The state-run bank's share sale, which will be the world's fourth-biggest
after the exercise of the greenshoe, tops the $9.2 billion raised in October by
rival China Construction Bank to be the nation's largest.
"It's pretty much a no-brainer in that most institutions see it as a stock
they have to own, and the brand name drives a lot of the non-institutional
demand, like corporate, wealth management, and retail," UBS Managing Director
David Chin told Reuters by phone from New York.
The warm investor reception to the deal -- despite recently choppy markets --
paves the way for the IPO later this year of the country's biggest lender,
Industrial and Commercial Bank of China, which aims to raise roughly $12
The Bank of China deal was priced below the top of the range after the recent
selloff in global emerging markets.
"It's just to show a gesture to the market that we took note of the market
fluctuations of the past few days," Chin said.
Pricing the deal below the top of the range leaves more room for Bank of
China shares to rise when they begin trading in Hong Kong on June 1 under the
stock symbol "3988"
Despite the IPO's popularity, many Hong Kong market players
expect Bank of China to make a subdued trading debut given its massive size,
which means there is less unfilled demand than has been seen in smaller hot
share sales from China in Hong Kong.
The deal attracted orders worth $152 billion, with the retail portion 76
times subscribed and the institutional part 12 times covered.
Beijing-based Bank of China attracted retail orders worth HK$291 billion ($37
billion), making it the city's most popular IPO yet. As a result, the retail
portion has been increased to 10 percent of the IPO, the world's largest from a
financial institution, from 5 percent.
After the so-called clawback, and excluding the shares earmarked for 12
cornerstone investors as well as Singapore investment agency Temasek Holdings,
the international portion of the IPO was 18 times covered, sources said.
Bank of China sold nearly 25.57 billion shares at HK$2.95 each, compared with
its indicated range of HK$2.50-HK$3.00 per share.
The deal values Beijing-based Bank of China at 2.18 times forecast 2006 book
value, below the 2.56 times and 2.49 times book value commanded by rivals Bank
of Communications and China Construction Bank, respectively.
Bank of China plans to follow up its Hong Kong share sale with a listing in
mainland China as soon as July that a source familiar with the situation said
would be worth roughly $1.5 billion.
The IPO was sponsored by BOC International, Goldman Sachs and UBS