The Qatar Investment Authority, the Doha-based sovereign wealth fund, agreed to invest $2.8 billion in Agricultural Bank of China Ltd.’s initial public offering, according to two people with knowledge of the matter.
The $58 billion fund signed an agreement with Agricultural Bank on June 17, the people said, declining to be identified because the deal is private. The bank has allocated more than $5 billion for corporate investors such as QIA in the Hong Kong part of its IPO, the people said.
Agricultural Bank, China’s largest by number of customers, is seeking to raise as much as $15 billion in the Hong Kong part of what could be the world’s largest IPO, according to an e-mail sent to investors last week. The Beijing-based lender may sell up to $28 billion of stock in Hong Kong and Shanghai combined, exceeding the $22 billion sale by Industrial & Commercial Bank of China Ltd. in 2006.
Qatar, holder of the world’s third-largest natural gas reserves, will likely generate a trade surplus of $22 billion this year helped by oil and gas sales, Giyas Gokkent, chief economist at the National Bank of Abu Dhabi PJSC, the United Arab Emirates’ second-biggest bank by assets, said in a phone interview today. Some of that surplus will flow to the QIA, which “it needs to recycle” and “investing in China is part of their diversification strategy,” he said.
Standard Chartered Plc, the London-based bank that gets most of its profit from Asia, will invest about $500 million in the IPO, said a person with knowledge of the matter.
Kuwait Investment Authority, the Persian Gulf country’s sovereign wealth fund, is interested in Agricultural Bank’s IPO, Managing Director Bader al-Saad said June 13. Kuwait, the third- biggest oil producer in the Organization of Petroleum Exporting Countries in May, will generate a trade surplus of $45 billion this year and “will be an exporter of capital this year,” Gokkent at NBAD said today.
The Qatar Investment Authority owns stakes in financial institutions including Credit Suisse Group AG and Barclays Plc. The fund bought Harrods Ltd. department store in London in May and a stake in Volkswagen AG last year. Barwa Real Estate Co., a developer controlled by the fund, on June 18 agreed to buy Park House, an office and retail project on London’s Oxford Street, for 250 million pounds ($370 million).
Agricultural Bank is pushing ahead with its offering after Europe’s sovereign debt crisis spurred more than 30 companies worldwide to postpone or withdraw IPOs globally since the start of May, according to data compiled by Bloomberg.
Corporate, or cornerstone, investors are guaranteed shares in IPOs in exchange for a pledge to hold the stock for a period of time. Companies use the cachet of the investors, who may be institutions, companies or billionaires, to drum up interest in their offerings among other potential buyers.
Agricultural Bank is reserving up to 40 percent of the Shanghai part of the IPO to cornerstone investors including over-allotment, the company said on June 16. Such investors will be required to hold 50 percent of their stock for at least 12 months and the remainder for 18 months in exchange for a guaranteed number of shares, according to the filing.
Cornerstone investors may account for about 40 percent of Agricultural Bank’s Hong Kong sale, according to people with knowledge of the matter. ICBC, the world’s largest lender by market value, set aside 28 percent of the Hong Kong part of its October 2006 IPO for such investors, before exercising a so- called greenshoe option.
Hong Kong, Shanghai
Agricultural Bank is selling 25.4 billion shares in Hong Kong and 22.2 billion shares in Shanghai, according to a draft prospectus. It can expand the offer by 15 percent after excising an over-allotment option.
Middle East sovereign-wealth funds may invest 25 percent of their new capital in the developing world by 2016 as economic growth there surges, George Pavey, a managing director at the global markets solutions group at Credit Suisse Group AG, said in November. Middle East funds were anchor investors in 2009 in the $3.3 billion initial public offering of Kuala Lumpur-based mobile phone operator Maxis Communications Bhd and the $1.79 billion IPO of property manager CapitaMalls Asia Ltd. of Singapore, which were managed by Credit Suisse, Pavey said then.