Transcript Introduction - Hong Kong Shue Yan University

IPO Of ICBC –
The Role Of China International
Capital Corporation Limited
Group 3
Wong Kai Yuen
043076
Kong Ka Man
043089
Lui Ching Kwan
043061
Lai Pui Ha
043074
Lee Tsui Woon
043077
Na Ka Ki
043082
1
Introduction



General investment bank function
Distinguishing feature of CICC
IPO of ICBC
2
The investment bank
Roles and Functions in IPO

Expertise
– Market information
Timing
 Pricing

– Listing service
Underwriting
 Private placement

3
Roles and functions in
IPO

Legal requirement
– A new applicant must appoint a sponsor
to assist it with it listing application (Main
board rule 3A.02)
– A Main Board sponsor must be a
corporation or an authorized financial
institution (Main Board Rule 1.01)
4
– A Main Board sponsor must be licensed or
registered under applicable laws to advise
on corporate finance matters (Main Board
Rule 1.01)
5
Underwriting

Underwriting Syndicate
– Lead or managing underwriter
– Underwriting dealer

purchase the shares and redistribute the
shares to the investors
– Selling group

only earns commission
6
Documentation

Preparing the new applicant for listing,
lodging the formal application for
listing and all supporting
documentation (Main board rule
3A.11)
7
Contents of listing documents
Statement of active
business pursuits
The new applicant must state its business activities and
financial information
(Appendix 1A to the Main Board Rules – Paragraphs 28 to 40)
Statement of
business objectives
The new applicant must provide information on its general
business trend, financial and trading prospects
(Appendix 1A to the Main Board Rules – Paragraphs 32 to
34(1))
Use of proceeds
The new applicant must disclose details of its intended
use of proceeds
(Appendix 1A to the Main Board Rules – Paragraphs 48 to 50)
Profit forecast
Profit forecast is not compulsory
(Main Board Rules 11.16 to 11.19)
Accountants’ report
• To cover 3 financial years except for exempted
companies (Main Board Rule 4.04)
• Can be prepared in accordance with either Hong Kong
Financial Reporting Standards or International
Financial Reporting Standards for primary listings on the
Exchange (Main Board Rules 4.11 to 4.13)
• May be prepared in accordance with generally accepted
accounting principles in the United States of America (US
GAAP) or other acceptable accounting standards acceptable to
the Exchange under certain circumstances (Main Board Rules
19.14 and 19.39)
8
Source: Hong Kong Shock Exchange and Clearing Ltd.

The prospectus
– company's business, financial statements, biographies of
officers and directors, detailed information about their
compensation, etc.

Road show
– promote the company prospect and the quality of
management team
– Collect market information

Private placement
– Usually before IPO
– Numbers of individual and financial institutions
9

Greenshoe (over-allotment option)
– right to sell additional shares
– up to 15% of the original number of
shares offered
10
CICC Profile



Establish on 1995
Strategic partnership among prestigious
Chinese and international financial
institutions and corporations
First joint venture investment bank in
China
11
CICC Profile

Registered capital of US$125 million

Headquartered in Beijing

With offices in HK, Shanghai & ShenZhen
12
6 Core business
13
Shareholders
7.50%
35%
7.50%
China Construction Bank
(CCB)
7.50%
Morgan Stanley International
Incorporated
China National Investment &
Guaranty Corporation
(CNIGC)
The Government of
42.50%Singapore Investment
Corporation (GIC)
Mingly Corporation Limited
(Mingly)
14
Business activities
Examples,

corporate restructuring

Inter-bank lending and borrowing

purchasing and selling foreign currencies

mergers and acquisitions
15
CICC Culture

CICC culture mainly concern on:
–
–
–
–
–
Integrity
Professionalism
Creativity
Competitiveness
Teamwork
16
Business
17
CICC Business
18
Investment Banking Department

IBD services include :
1.
2.
3.
4.
Equity financing
Debt financing
Corporate restructuring
Mergers and acquisitions in both domestic,
international capital market
5. Asset securitization
19
Equity Financing

Equity Financing service includes :
– IPO
– follow-on offerings
– private placements
Industrial
and
Commercial
Bank of
China
Year
2006
The largest H shares IPO so
far, raising about US$14
billion (pre-Greenshoe).
20
Debt financing

Debt financing service includes :
–
–
–
–
institutional bonds
convertible bonds
short-term financing bonds
financial bonds
21
Strengths
22
Lead underwriter

Leading Chinese enterprises to access
overseas
– CICC has led four of the top five A-share IPOs
in domestic equity market.
– CICC has led all top five debt (including
convertible debt) offerings in domestic debt
market.
23
Bookrunner Ranking for Overseas Equity
Issuing of Chinese Enterprises Since 1997
24
Note：The ranking was made by allotting the issuing size averagely between bookrunners.
Information Source：Equityware, up to December 31, 2005
Bookrunner Ranking for Overseas IPO Issuing
of Chinese Enterprises Since 1997
Note：The ranking was made by allotting the issuing size averagely between bookrunners.
Information Source：Equityware, up to December 31, 2005
25
Top Overseas IPO of Chinese Enterprises Since
1997
26
Professional investment
team

Senior Management with Global Experience
– even served as Managing Director in a leading
U.S. investment company
– can contribute more knowledge
– help the CICC has a good operation
management
27

Extensive Experience in Domestic Market
– with outstanding performance records and
industry reputation

Management Group with Excellent
Professional Attributes
– have good reputations in financial field
– without any misdemeanor records.
28
Case study: IPO of ICBC
How does CICC Help ICBC to issue IPO?
29
Source : HKEx
30
Planning and Preparation
Selecting the sponsor, advisers and
underwriters
 IPO of ICBC is the world’s Biggest one
 near $300 million banking fees
→ Competition

CICC Success as Chief investment
bank
31
Role of CICC



Joint global coordinator
Joint bookrunner
Joint sponsor for both H and A share
32
Source : HKEx
Preparing the timetable

Specific timetable of the issue of IPO was
prepared on May
Timetable of the Initial Public Offering
Year 2006
January
establish non-exclusive strategic cooperations
March
Select the Joint Lead Managers
25-Mar
Listing application have been accepted
22-Jun
The advance booking form had submitted
18-Jul
The Formal application for listing was passed
August
The underwriting syndicate prepare for the Road Show
21-Sep
ICBC was under the hearing by Listing Committee
9-Sep
Road Show was started
16-Oct
Write application and eIPO was started
19-Oct
Write application and eIPO was ended
20-Sep
Stock Price determined
27-Oct
Both H share and A share listed
33
Structuring
Capital Share :

Before Global Offering
Number of Share
Goldman Sachs
6%
SSF
5%
Allianz
2%
American
Express
0%
MOF
MOF
44%
Huijin
SSF
Goldman Sachs
Allianz
American Express
Huijin
43%
Source : HKEx
34
Structuring

Upon Completion of Global Offering
and A Share Offering
Number of Share
American H shares issued
11%
Express
A shares issued
0%
4%
Allianz
2%
MOF
37%
MOF
Huijin
SSF
Goldman Sachs
Allianz
Goldman Sachs
5%
American Express
H shares issued
SSF
5%
A shares issued
Huijin
36%
Source : HKEx
35
The Listing Application
On 22nd June :
 Submit the advance booking form
(Form A1 in Appendix 5 to the Main
Board Rules) with a timetable to HKEx
On 18th July :
 Submit the Formal application for
listing
36
The Listing Application
On 21st September :
 Hearing by Listing Committee
 Obtaining approval from the Listing
Committee of the Exchange
37
Targeting and Contacting
Investors
Road show

Over the world like Singapore and some
European countries
Road Show in Hong Kong

Clearing up nonperforming loans of the bank
38
Private Placement
Investors in Hong Kong
 HK$27.2 billion worth of shares
 27 percent of H shares.
 Li Ka-shing - HK$1.6 billion
 Lee Shau kee - HK$1.6 billion
Overseas investors

GIC Direct Investments - HK$2.8 billion
39
The offering prospectus

16/10/2006 – 19/10/2006
White Application Form + Prospectus

27/10/2006 Listed Date
Prospectus distribution
1.
2.
3.
4.
5.
HSBC
ICBC
Hang Seng Bank
Bank of China Limited
Standard Chartered Bank Limited
40
e-IPO



www.eipo.com.hk
The first H share allowing Write
Application though eIPO
Main difference :
- check account are not necessary
41
Price Determination



Set between 1.95 and 2.23 times 2006
price-to-book value
Deutsche Bank : pricing will be up to
2.9 times price-to-book value
CICC : the fair value should be about
2.31 times 2006 price-to-book value
42
Stabilization

Strategic investors agreed not to
sell / dispose / transfer any shares for
certain period of time

Lock-up period

Private Placement - 12 months
– Agree to inform before dispose

Strategic investors - 3 years
– Only up to 50% of the share were
permitted to sell / dispose / transfer
43
Conclusion
44
Main Function

Giving Advice
– When to issue
– How many
– What price

Filing Documents
– Prospectus

Underwriting
– Road Show
45
IPO issue process
March
May
July
Select Investment bank
Detail planning on the IPO schedule
18th Apply for issuing stock in HKEx
Aug
Sep
Oct
Formal Issuing Road show
21st Listening by HKEx
16th IPO Open
19th IPO Close
20th Expected price determination date
26th Results announcement date
27th Cheques refunded
27th Listing of Shares
46
Issue Particulars
Industry sector
Banking
Listing category
Mainboard
Major Shareholders
MOF 43%
Total shares outstanding (mn)
327,822
H share issue price (HK$)
2.56 – 3.07
H share total offer for size (HK$mn) 90,601 – 108,650
H shares offered for placement (mn) 33,621.45
H shares offered for IPO (mn)
1769.55
839,000 – 1,006,400
Market cap. of shares (HK$mn)
47