Agbank: The Hong Kong underwriters of Agricultural Bank of China know who’s in control. Six banks are marketing the lender’s IPO, five of them foreign. Yet for all their labours, AgBank has yet to tell them who will be top dog, or even what they will be paid. Outside of China, such hardball tactics are virtually unheard of.
As the name at the top of the IPO prospectus, the “global co-ordinator” role brings prestige. It can also bring extra profit, as the position can come with a performance fee or a bigger tranche of shares to distribute.
AgBank picked its underwriters in May. Three of them — Goldman Sachs, Morgan Stanley and China International Capital Corporation — have even attended extra “steering” meetings. Yet none of them know exactly who gets the prized title. Remuneration too remains unusually fuzzy. The typical reassurances that banks will get roughly what they pitched for are missing, say people familiar with the situation.
AgBank may feel it can afford to spread a bit of uncertainty. Vice-chairman Pan Gongsheng has experience of managing jockeying Western banks, having run the fiercely contested flotation of lender ICBC in 2006.
At potentially $14 billion, AgBank's Hong Kong listing is the year's largest, and a must-have for distributors of Chinese stocks.
Besides, the banks have faith they will all be treated well eventually. They will be happy to get the fees of previous Chinese bank IPOs, about 2.5 per cent of the amount raised.
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For them, AgBank is a low-risk deal, with around 40 per cent of the shares pre-allocated to long-term investors, and sub-underwriters taking up maybe half of what remains.
Still, the uncertainty must be frustrating. Global banks have spent time, money and effort building goodwill in China. Some, like Goldman, have held shares in mainland partners which they might rather have sold.
Others, like Morgan Stanley, have transferred skills to joint venture partners, only to be strategically sidelined.
Without such largesse, the five foreign banks on AgBank's listing may not have been on the deal at all. But their labours have yet to be translated into preferential treatment.
