Transcript Investment Banking Merrill Lynch ICBC in IPO

Investment Banking
Merrill Lynch
ICBC in IPO
Financial Institution in HK
ECON 310
s4g4
Introduction to investment Bank

Best known in the world

Help companies to raise money in primary market

Intermediaries

Differ from commercial bank & brokerages

Commerical Bank: Take deposits and make commercial and
retail loans

Brokerages:Assist in the purchase and sale of stocks, bonds, and
mutual funds
Background of Merrill Lynch

Established in 1914

Owner: Charles E. Merrill &
Edmund C. Lynch

Place: Wall street in New York
City

In 1959 become 1st member
firms of the New York Stock
Exchange

Go public in 1971
Background of Merrill Lynch (con’t)

CEO

President & Chairman of
the Board

Industry: Finance &
Insurance
I’m Stan O’ Neal

Main Products

Financial Services

Investment Banking

Investment Management
Stan O’ Neal
Responsibilities of Merrill Lynch
Year
Events
1980
Started the underwriting business
2001
E. Stanley O’ Neal became president and
COO
Merrill Lynch, Citigroup and Goldman Sachs
advised AT&T on its IPO
2002
E. Stanley O’ Neal became CEO
2003
7.1% market shares of the deals
E. Stanley O’ Neal became the first AfricanAmerica chairman of Merrill
2004
Won the advisory on the sale of AT&T
Wireless Group
2006
Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
Dabit, a 2006 Supreme Court case involving
security fraud claims

Underwriting

Researching &
provide advice

Pricing
Multicultural Marketing of Merrill Lynch

African American Marketing

Hispanic American Marketing

LGBT (Lesbian, Gay, Bisexual and Transgender)
Marketing

Native American Marketing

South Asian Marketing

Special Needs Marketing

Women’s Marketing
Major Locations of Merrill Lynch

New York City, New York, U.S., global headquarters

Jacksonville, Florida, U.S., corporate center,
supporting North America operations

Hopewell, New Jersey U.S., corporate center,
supporting North America operations

Jersey City, New Jersey U.S., corporate center,
supporting North America operations
Major Locations of Merrill Lynch (Con’t)





Princeton, New Jersey, U.S.,
corporate center, GPC
Home Office
Singapore, corporate center,
supporting Asian Pacific
Rim (APR) operations,
namely Hong Kong & Tokyo
London, UK, European
headquarters
Hong Kong, PRC
Tokyo, Japan
Financial performance
Net Revenue of Merrill Lynch
12,000
10,000
8,000
Net revenue 6,000
(US$millions)
4,000
2,000
0
Q1
2003
2004
2005
Q2
2006
Q3
Quarter
Q4
2005 Net revenue by category
Other
8%
Investment
Banking
14%
Principal
Transactions and
Net interest Profit
32%
Consolidated
Investment
Asset
Management/
Portfolio Service
fees
23%
Commissions
21%
Ranking of Merrill Lynch
Bes t Serv ic e in Equit y
U nderw rit ing
Best at Proving IPOs and services
80
160
70
140
60
120
50
100
Poi nts
80
40
Points
60
30
40
20
20
10
0
0
Merrill Lynch
Goldman,
Sachs
Alex. Brown
& Sons
Investment bank
CS First
Boston
Morgan
Stanley
Goldman,
Sachs
Merrill
Lynch
CS First
Boston
Inv es tment Bank
Salomon
Brothers
Morgan
Stanley
Business Groups of Merrill Lynch

Big 3 Groups:



GMI: Global Markets &
Investment Banking Group
GPC:
Global Private Client
MLIM:
Merrill Lynch Investment
Managers/ BlackRock, Inc.
2005 Net Revenues by Segment
MLIM
7%
GPC
41%
GMI
52%
Highlights achieved in the markets

No. 1 trader of U.S. Stocks (NYSE) since 1989

2005


No. 1 Private Banking Assets, fifth consecutive year,

Leading Player

Best Investment Bank of the Year by The Banker.

Top European Equity House by International Financing
Review

Top China Equity House by International Financing Review
Asia.
2006

Best Investment Bank by Euromoney

Barron's Best 100 Brokers

Top Full-Service Brokerage House
Background of ICBC

Established in 1 Jan 1984

One of the big four commercial bank

Decided to restructure

Financial structure :
IPO Procedure
2005

Financial restructure
2006

9 Mar
Investment banks were chosen

12 Jul
ICBC decided Issue A and H-share simultaneously

20 Jul
Formal application

9 Oct
International Road Show

16 – 19 Oct Subscription for the Public

20 Oct
prices $3.07 (upper limit)

23 Oct
Oversubscribed 76 times
977,000 people involved
US$543 billions was frozen

27 Oct
made public, price @ $3. 60 ( 17%)
Listing information
Specialty of ICBC IPO
The


biggest IPO in the world
Raise US$21.9
billion
Break the record
made by


NTT DoCoMo Inc
(Japanese mobile
phone company)
Which raise $18.4
billion in 1998
Source:The Wall Street Journal Briefing (http://www.tdctrade.com/econforum/dj/wsj061001.htm)
Specialty of ICBC IPO(con’t)

First time issue A and H-shares simultaneously

Landmark of the stock history

the Chief Executive

Mayor of Shanghai

Good example for other enterprises
attended the ICBC’s IPO
ceremony in Hong Kong and
Shanghai respectively
Specialty of ICBC IPO(con’t)

Biggest white form eIPO application

~10% investors using eIPO (~ 83,000 people)

Protect the environment

Convenient to investors

Saving the transaction fee to investors

Receive allotment result by email
Specialty of ICBC IPO(con’t)

The highest capital was frozen in A share

$800 billion was frozen

break the record of the Bank of China.
Specialty of ICBC IPO(con’t)

Other new records

Most retailer investors apply ( 997,000 people)

First day  HK$37.4 billion

No. of bank collect form  7 Banks, 88 branches

Issue Warrant and Share simultaneously
Influence in HK

Ensure the international financial position in HK

2004



world 3rd largest fund raised market
After New York and Madrid
2006


HK has good banking system & listing requirement
ICBC & BoC IPO → the largest fund raised market
Influence in HK (con’t)

Issue H-share



→ improve corporate governance
→ internationalization
Going public in HK → Trend in the foreseeable future
Comment

Playing an important role on adjusting the initial
price of stock
 advice: not to issue so many warrants
 to stabilize the initial price

Setting of initial price
 a gain for all the subscribers in the market
 underwriting fee: 2.5% per book runner
 Merrill Lynch itself earned $50M
043083 SIU KAM HA JOYCE
Comment (Con’t)

Position has been raised

Exposure of a variety of risks
 e.g. market risk, Liquidity Risk, Competitive Environment
 caused by the unpredictable factors
 Suggestion: paying more attention
+ identifying the risks
+ solutions
043083 SIU KAM HA JOYCE
Conclusion

Merrill Lynch had played an important role on
the success of ICBC stock issuing
 giving contributable advice
 gaining satisfactory earnings + growth
 being one of the most famous investment banks in
the world
 affecting other companies’ ranking
 somehow a promotion of a stock with the
invitation of large book runner
043083 SIU KAM HA JOYCE
tHe EnD

Joint Coordinator & Joint Sponsors




CICC
ICEA
Merrill Lynch
Joint Bookrunners





Merrill Lynch
CICC
Credit Suisse
Deutsche Bank
ICEA
Back