Agricultural Bank of China in $29bn IPO talks

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Agricultural Bank of China has started detailed talks with foreign and domestic banks to arrange a long-awaited initial public offering that could raise $29bn, which would be the world’s largest listing.

A successful listing is likely to eclipse that of Industrial and Commercial Bank of China – which raised $21.9bn in Hong Kong and Shanghai in 2006.

The state-owned Agricultural Bank is China’s last big commercial lender to list and investment banks have spent the past two years lobbying to win lucrative advisory mandates.

Western bankers including Brian Moynihan, chief executive of Bank of America Merrill Lynch, and John Mack, chairman of Morgan Stanley, have visited Beijing in recent weeks.

They saw senior Agricultural Bank executives to discuss the IPO, as well as meeting other key officials connected to rival Chinese banks’ capital raising plans, according to people familiar with the matter.

Agricultural Bank’s IPO has been repeatedly delayed by Beijing since 2006 to give the lender time to reform its management and balance sheet, which was dented by non-performing loans to the country’s rural economy.

Agricultural Bank is expected to push ahead with a listing in Shanghai and Hong Kong this summer, according to bankers familiar with the situation.

The bank is China’s third largest lender by assets and posted 2009 profits of Rmb65bn ($9.5bn), up 26 per cent on the year before. Its branch network of 24,000 is the country’s largest, as is its customer base of 350m.

More than 20 global and domestic banks spent the Easter weekend responding to “requests for proposals” from Agricultural Bank to be lodged this week.

“The balance sheet of Agricultural Bank has been significantly tidied up and every bank is desperate to be part of this mega IPO,” said one Hong Kong-based banker.

Chinese regulators have signalled the IPO could raise as much as Rmb200bn, but documents sent by Agricultural Bank to potential underwriters did not specify the timing or size of the listing.

Chinese media reports and analysts suggest Goldman Sachs and UBS are frontrunners for the Hong Kong underwriting mandate, while the Chinese firms Citic Securities and CICC are tipped for Shanghai.

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