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Monday June 14, 2010

Temasek to invest US$300m in AgBank


SINGAPORE: Singapore’s state investment fund Temasek plans to invest up to US$300mil in Agricultural Bank of China, ahead of the latter’s roughly US$20bil IPO, a source said.

Temasek’s commitment to China’s third largest bank is a positive step for the offering, though it is less than the US$1bil that AgBank’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.

AgBank’s Shanghai-Hong Kong listing will be the world’s largest ever IPO, if it exceeds US$21.9bil.

Temasek declined to comment. AgBank could not immediately be reached. The source was not authorised 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 AgBank’s offering.

The Beijing-based bank, founded in 1951 by Mao Zedong as the rural unit of the central bank, has a customer base spread across China’s far-flung parts, though it does a have a major presence in most of the country’s major cities.

AgBank today boasts nearly 24,000 branches and employs more than 441,000 people, eclipsing Industrial and Commercial Bank of China (ICBC) and China Construction Bank, the world’s two biggest banks by market value.

If AgBank raises more than the US$23bil it hopes, it will be the world’s largest ever IPO, beating out ICBC’s US$21.9bil dual listing in 2006.

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

The sources said the IPO was expected to price on July 7, with a debut the following Thursday or Friday. — Reuters

Normally, cornerstone investors are locked-up for six months, but with the scale of AgBank’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% on its debut, important less for long-term stability than a prideful opening day triumph for a high-profile Chinese institution. — Reuters

For another perspective from The Straits Times, a partner of Asia News Network, click here.

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