Citic Securities Co. may exclude foreign underwriters in favor of Chinese bankers for its $2.2 billion Hong Kong stock sale, bolstering the nation’s push to build global investment banks that can compete overseas.
China’s biggest brokerage by market value turned down foreign banks that asked to be considered for a role on the deal, two people with knowledge of the matter said. The firm chose BOC International Holdings Ltd., CCB International (Holdings) Ltd. and ICBC International Holdings Ltd. as bookrunners, three people familiar with the sale said. Citic Securities’ overseas unit will also help manage the offering.
The arrangers would be the first all-Chinese group to run a Hong Kong stock sale worth at least $1 billion, data compiled by Bloomberg show. Four Chinese firms are among the city’s top 10 underwriters of equity so far in 2011, more than in any other year, according to Bloomberg data going back to 1999.
“The Chinese banks will have to take the first step sooner or later,” said Li Kwok-suen, a fund manager at Phillip Capital Management (HK) Ltd. “Armed with years of experience in handling IPOs, they should be able to get the deal done.”
Beijing-based Citic Securities is 24 percent owned by Citic Group, created in 1979 as China’s first state-owned investment corporation. The company sold shares in an initial public offering in Shanghai in 2003.
Citic Securities may consider adding a foreign bank to the deal later if needed, one of the people said.
“Citic Securities has been receiving a great deal of support from domestic banks,” David Dou, vice president of Citic Group, said in an interview in Hong Kong on April 27. “Support from foreign banks is rather limited.” Dou didn’t identify Citic Securities’ underwriters.
The offering may bolster Chinese equity underwriters in Hong Kong in more ways than one as Citic Securities can use the proceeds to expand and hire senior investment bankers. The firm is in talks with Paris-based Credit Agricole SA about combining investment-banking operations.
Citic Securities International, the company’s overseas division, is scouting for acquisitions that would help it grow abroad, Yin Ke, chief executive officer of the unit, told the Wall Street Journal in an interview.
The unit advised on the initial public offering of Li Ka- shing’s Hui Xian Real Estate Investment Trust, Hong Kong’s first stock sale denominated in yuan. Hui Xian fell as much as 11 percent on its first day of trading today after raising 10.5 billion yuan ($1.6 billion).
‘Willing to Pay’
Local rival Haitong Securities Co. said April 26 it plans to sell stock in Hong Kong to raise money for overseas growth. The companies are poised to become the first Chinese securities firms traded outside mainland China. Haitong’s sale may raise up to $1.8 billion, based on yesterday’s closing price in Shanghai.
Haitong Securities’ international unit is “willing to pay what’s needed” to lure bankers from U.S. and European rivals as it seeks to double its investment-banking workforce, incoming Chief Executive Officer Lin Yong said in an April 20 interview.
The unit, Haitong International Securities Group Ltd. (665), aims to boost its 75-person investment banking division by 50 percent to 100 percent, Lin said.
ABCI Securities Co., the investment banking unit of Agricultural Bank of China Ltd. (1288), will also have a role on the Citic Securities sale, the people said. The stock offering may raise $2.2 billion, based on the market value of Shanghai-traded Citic Securities and a March 28 announcement that it may account for 10 percent of the company’s enlarged share capital.
The underwriters’ desire to ensure the deal is a success may make them more willing to compromise on price, said Raymond So, dean of the business school at Hang Seng Management College in Hong Kong.
“If needed, they may under-price it to make people eager to subscribe,” So said. “This deal won’t fail.”
Raymond Tang, a Beijing-based spokesman for Citic Securities, declined to comment.
Four Chinese banks -- BOC International, Citic Securities, China International Capital Corp. and Bocom International Holdings Co. -- are among the top 10 underwriters of stock sales in Hong Kong this year, according to data compiled by Bloomberg. Last year, BOC International and CICC were the only Chinese banks among the 10 largest underwriters, the data show.
In 2007, BOC International was sole bookrunner on the Hong Kong IPO of Xinjiang Xinxin Mining Industry Co., which raised HK$4.5 billion including proceeds from overallotment shares. In 2004, CICC managed the sale of Irico Group Electronics Co., which raised HK$767 million in the first IPO outside the mainland handled by a Chinese investment bank without the help of foreign underwriters.
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