ICBC mandates banks for upcoming IPO

Goldman Sachs excluded but Morgan Stanley given a surprise role.
Industrial & Commercial Bank of China yesterday (March 9) confirmed that it has hired Credit Suisse, Deutsche Bank and Merrill Lynch to help arrange its upcoming IPO, which is expected to raise about $10 billion.

In a Chinese-language announcement issued via its Hong Kong branch, ICBC also said a China International Capital Corp consortium and its own joint venture investment bank ICEA Securities will join the three international investment banks as joint arrangers.

As rumoured in recent days Goldman Sachs was not mandated for the offering, even though the US investment bank had been considered a front runner due to its experience in taking other large Chinese enterprises public and because it recently led a group of investors in buying a $3.8 billion stake in ICBC. The exclusion was widely seen to stem from concerns over a perceived conflict of interest as Goldman Sachs is also mandated together with BOC International and UBS to handle the IPO for Bank of China.

While Bank of China is scheduled to come to market in June at the latest and ICBCÆs IPO is not expected until the fourth quarter at the earliest - and possibly not until early 2007 - it is believed officials involved in the decision wanted to avoid even the potential for a clash between the two offers. Goldman is also one of the bookrunners for China Minsheng BankÆs planned IPO, although this deal will be much smaller in size and is seen to have played less of a role.

Even more surprising is that it appears Morgan Stanley will play a role in ICBCÆs IPO, despite the fact the bank was not even invited to pitch for a mandate.

According to the ICBC announcement, however, the mandated CICC consortium consists of an alliance between CICC and Morgan Stanley. Sources familiar with the selection confirmed last night that Morgan Stanley will have a role, although it was unclear what that role would be.

Morgan Stanley owns 34% of CICC.

The underwriting roles on the ICBC deal have been hotly contested because the size of the offer suggests it will generate about $300 million in fees. The IPO is set to be the largest in the world in more than six years and should surpass last yearÆs $9.2 billion offering by China Construction Bank.

ICBC is the largest mainland lender with Rmb6.14 trillion in total assets at the end of June 2005.

The Goldman-led investment into ICBC, which was formally announced in January, will see the US investment bank pay $2.58 billion for a 7% stake through one of its investment arms, while Allianz AG is paying $1 billion for a 2.5% stake and American Express is putting up about $200 million.
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