AgBank seeks $11.4 billion in Hong Kong leg of IPO

Agricultural Bank of China Ltd plans to raise as much as $11.4 billion through the Hong Kong portion of its initial public offering, sources close to the deal said, setting a price range that keeps the lender on track for the largest IPO on record.

AgBank, which kicks off a formal marketing roadshow on Thursday, set a proposed price range of HK$2.88-HK$3.48 a share for the Hong Kong offering, the sources said late on Wednesday.

An unnamed person involved in the deal was quoted by a newspaper on Wednesday as saying AgBank was likely to set a price of 2.60-2.70 yuan ($0.38-$0.40) a share for the Shanghai part of a dual listing that is expected to eclipse the $21.9 billion raised by Industrial and Commercial Bank of China's IPO in 2006.

The Hong Kong range gives China's third-largest bank with assets of $1.4 trillion a price-to-book value of 1.55 to 1.79 times, before any share over-allotment is factored in.

That puts Beijing-based AgBank on par with the Bank of China, the country's fourth-largest bank, and below the more than 2 times book that China's top banks trade at.

Valuation will be critical in determining the final price of the deal.

AgBank, the last of China's four big state banks to go public, is looking to replenish its capital and drive growth. It had originally hoped to raise up to $30 billion but scaled back expectations amid a 20% drop in China's stock market in recent months.

News at the weekend that China is relaxing control of the yuan has boosted China's stock market, helping sentiment for the mega-IPO.

To get to the $23 billion AgBank now hopes to raise, it will have to exercise the 15% over-allotment of shares set aside for the dual-listing, which is scheduled for July 15 in Shanghai and a day later in Hong Kong.

The company and its underwriters are marketing the offer to institutional investors, having sold $5.45 billion of the Hong Kong deal to corporations and sovereign wealth funds.

AgBank will offer 25.4 billion shares in Hong Kong and 22.2 billion shares in Shanghai.

The sources who gave the pricing information are directly involved with the deal but could not be named as the information is not yet public. AgBank could not be reached for comment.

The bank, headed by 53-year-old war hero Xiang Junbo, started pre-marketing the IPO to potential Chinese investors last week and is scheduled to begin taking subscriptions on July 1.

It should set the IPO price on July 7.