Bank of China IPO Raises $9.7B

HONG KONG – Bank of China Ltd. on Wednesday priced its Hong Kong initial public offering near the top of the expected range, raising $9.7 billion in the world's biggest stock offering since 2000, despite the recent turmoil in Asian stock markets.

China's second-largest bank by assets sold 25.57 billion shares, or about 10.5 percent of its enlarged share capital, for 2.95 Hong Kong dollars (38 U.S. cents) per share, according to a person familiar with the deal.

The bank had set a price range of 2.50 to 3.00 Hong Kong dollars (32 to 39 U.S. cents).

The Bank of China's IPO is the country's largest ever share offering, and the world's biggest since a $10.6 billion IPO by AT&T Wireless Services Inc. in April 2000.

The bank's shares will start trading on the Hong Kong stock exchange June 1.

The drop in Asian markets over the last two weeks didn't seem to deter investors who saw the IPO as a way to gain exposure to China's booming economic growth.

"The shares priced on the high end, which made them expensive, but this is understandable given the strong demand for the stock," said Pauline Dan, executive director of equities at Manulife Asset Management in Hong Kong.

If an option to increase its share offering by 15 percent is exercised, the proceeds of the IPO will rise to $11.2 billion, or 11.89 percent of its enlarged share capital.

The Bank of China is the second of China's "Big Four" state-owned mainland banks to sell shares to international investors via the Hong Kong market. China Construction Bank raised $9.2 billion in October.

Wilfred Sit, director of Asian equities and fund manager of the Greater China Fund at Baring Asset Management, said a key selling point for Bank of China was its huge nationwide distribution and branch network.

"This is something that cannot be replicated by any foreign bank," said Sit.

Interest in Bank of China's IPO was also fueled by China Construction Bank's shares rising 44 percent since their listing.

"We are positive on the macroeconomic growth prospects in China, which should benefit the bank through better loan growth," said Dan of Manulife Asset Management.

Earlier this month, Bank of China's chairman, Xiao Gang, said it will also look to the domestic stock exchange to raise additional funds.

Prior to listing, Bank of China drew a handful of foreign investors, eager to take a stake in the state-owned lender. Singapore's Temasek Holdings, the local government's investment arm, UBS AG and a consortium led by the Royal Bank of Scotland Group PLC have purchased stakes in Bank of China worth a total of $5.1 billion.

Bank of China's IPO is the first in a series of Hong Kong offerings by Chinese banks this year that are expected to raise a total of $25 billion, including more than $10 billion by Industrial & Commercial Bank of China, China's largest bank in terms of assets, at the end of the year, and a $2 billion deal by China Merchants Bank in September.

Goldman Sachs (GS), UBS AG and Bank of China International acted as bookrunners for the IPO.