China's Agricultural Bank IPO may net $23 billion

By MIN LEE Associated Press Writer

HONG KONG (AP) - Agricultural Bank of China capped the price range for its upcoming public offering at a level much lower than expected in response to investors, an executive said Tuesday, but the world's largest share listing is still projected to raise up to $23.2 billion.

The rural lender, the last of China's big four state-owned banks to list, is preparing a dual initial public offering in Shanghai and Hong Kong next month that could exceed the record $21.9 billion IPO by Industrial and Commercial Bank of China in October 2006.

Original forecasts put the possible proceeds for the IPO at a whopping $30 billion. But investors appear unprepared to pay that much for shares in a bank whose profitability is viewed as weaker than its urban-focused competitors.

Beijing-based Agricultural Bank, also known as ABC, set the price range for its Shanghai shares at 2.52 yuan-2.68 yuan ($0.37-$0.39). The bank's Hong Kong IPO price range is 2.88 Hong Kong dollars to HK$3.48 ($0.37-$0.45).

The bank is offering 22.23 billion shares in Shanghai and 25.41 billion shares in Hong Kong, excluding an overallotment option.

But analysts warn that investors may not be willing to bid at the top of the price range: Mainland Chinese shares have slumped in recent weeks on worries that the huge IPO may overwhelm demand, pulling prices lower.

ABC Executive Vice President Pan Gongsheng told reporters in Hong Kong on Tuesday the pricing reflected feedback from institutional investors and analysts during the roadshow.

"We hope to create a win-win situation for investors and the issuer through this reasonable pricing," Pan said from New York via video link.

The bank said in its Hong Kong prospectus that major foreign investors in the Hong Kong offering are Qatar Investment Authority ($2.8 billion), Kuwait Investment Authority ($800 million), Britain's Standard Chartered Bank ($500 million), Dutch bank Radobank Nederland ($250 million), Australia's Seven Group Holdings Ltd. ($250 million) and Singapore's Temasek Holdings ($200 million).

Hong Kong property giant Cheung Kong (Holdings) Ltd., Archer-Daniels Midland Co. and United Overseas Bank Ltd. have each committed $100 million.

Pitching the stock, chairman Xiang Junbo said the company has huge growth potential because China's rural areas are the next frontier for economic growth, adding it had yet to fully reap the benefits of its restructuring. ABC is the last of the big four to restructure and go public.

"ABC's development path matches that of the macro Chinese economy," Xiang said from London via video link.

The chairman also said the bank was well equipped to deal with the possible appreciation of the Chinese yuan after Beijing's recent announcement that it will allow greater flexibility in valuing the currency.

Xiang said ABC has the lowest percentage of foreign currency holdings among the big four and that as of the end of 2009, only a small portion of its corporate loans were directed to Chinese companies heavily dependent on exports.

ABC said its net profit expanded from 43.8 billion yuan ($6.4 billion) in 2007 to 51.5 billion yuan ($7.6 billion) in 2008 and 65 billion yuan ($9.6 billion) in 2009.

ABC will announce the final IPO price by July 7 and its shares begin trading in Shanghai on July 15 and a day later in Hong Kong.

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Associated Press Business Writer Elaine Kurtenbach contributed to this report from Shanghai.