SHANGHAI/BEIJING: The Agricultural Bank of China plans to sell a greater-than-expected amount of its roughly $20 billion initial public offering to pre-IPO investors such as Middle East and Asian sovereign wealth funds, as well as other global corporations, sources said on Wednesday. Sources directly involved with the offering said sovereign funds, including China Investment Corp (CIC), Qatar, Kuwait and Temasek, were seen as likely buyers of pre-IPO stakes in AgBank, along with Dutch group Rabobank, which just signed a strategic agreement with China's third-largest lender. AgBank [ABC.UL] is pushing for a valuation of 1.6 price to book, which would place the size of its IPO at about $23 billion to $25 billion, according to the sources, or around $5 billion to $7 billion less than it originally hoped. The eventual size of the offering, however, is anyone's guess at the moment, as the company has yet to go on its roadshow to potential investors, and yet to release the formal prospectus. The so-called cornerstone investors are expected to be signed this week, ahead of Monday's premarketing period, with sources saying that such buyers could take as much as 40 percent of the Hong Kong offering — roughly one-third more than is typical. That surplus can be attributed to the size of the offering and the difficulty it is facing in a down market. Along with several other companies, insurer China Life Group is also expected to invest, as it has with many large domestic IPOs in the past. The sources were not authorized to speak publicly about the transaction. AgBank was not immediately available for comment. It is widely expected that AgBank will get the okay from Hong Kong's listing committee on Thursday. If so, the lender will start pre-marketing on June 14 and kick off the formal marketing roadshow on June 24. AgBank plans to list in Shanghai on July 15 and in Hong Kong on July 16, sources said. Agricultural Bank of China on Wednesday won regulatory approval for the Shanghai portion of its initial public offering. The approval, while largely procedural, brought a degree of certainty back to AgBank's fundraising plans, after local and Hong Kong media cast doubt on Wednesday on whether it would move along in the next few weeks, as planned. A senior executive with the bank dismissed reports that AgBank's state shareholders were pushing it to postpone its fundraising plans due to the relatively weak market conditions. The Hong Kong-based South China Morning Post on Wednesday cited two unidentified sources involved in the offering as saying AgBank's two state shareholders — the Ministry of Finance and Central Huijin — wanted AgBank to postpone its listing as it was having difficulty drumming up interest in the sale. Central Huijin is the arm of China's sovereign wealth fund. Contacted by Reuters by telephone, AgBank Vice President Pan Gongsheng said such reports were "nonsense". Some domestic media outlets have also suggested the government was pushing for a delay of the IPO. "Many potential investors have expressed great interest," Pan said, in AgBank's first public denial of the reports. AgBank's insistence on at least a 1.6 times price to book value stems in part from its desire to command a greater valuation than Bank of China 601988.SS, the country's fourth-largest bank, which trades at around 1.4-1.5 times book. A Reuters poll of 18 fund managers, strategists and analysts conducted this week suggests investors will scoop up AgBank shares if it asks for a valuation of 1.5 times its book value. AgBank unveiled key financial figures last Friday, detailing plans to issue up to 47.6 billion new shares, or 15 percent of its expanded capital, and forecasting a sharp rise in yearly net profit. Shanghai A shares would account for 7 percent of the lender's enlarged capital, while its Hong Kong H shares would account for 8 percent, according to the preliminary prospectus. – Additional Reporting by Jason Subler, Samuel Shen, Shen Yan, Michael Wei, Xie Heng, Kennix Chim, Denny Thomas, Fiona Lau and Saeed Hasan
