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| PICC Group | |
| Size | $3.56 billion H-share IPO (Hong Kong) |
| Joint global coordinators | Deutsche Bank, Goldman Sachs, Credit Suisse, CICC and HSBC |
| return to the Asia Deals of the Year index | |
PICC’s December IPO in Hong Kong was the largest IPO to come out of the special administrative region in nearly two years.
A total of 17 cornerstone investors with a combined $1.82 billion of demand were secured ahead of the roadshow, covering around 60% of the overall IPO. “This inevitably created demand for the rest of the tranche,” says Ashok Pandit, head of ECM at Deutsche Bank in Hong Kong.
“Interest from cornerstone investors invigorated investor confidence,” says an equity capital market banker close to the deal. “AIG’s huge share [of $500 million] showed commitment on their side and helped to alleviate some of the uncertainties heightened among investors last year.”
Deutsche Bank, Goldman Sachs, Credit Suisse, CICC and HSBC were the joint coordinators on the deal. They were joined by 17 bookrunners, creating an unusually big syndicate that raised eyebrows in many quarters.
The equity capital markets banker says: “The fact is when there are so many bookrunners involved in a process like this it can become unwieldy. It was difficult to advise them to keep the syndicate down to a minimum, purely because they would have thought we were doing this for selfish reasons. I think PICC panicked. Perhaps they felt the more bookrunners, the better.”
Hong Kong’s IPO market performed weakly in 2012, with several issues either being suspended or being pulled completely. Manchester United attracted particular attention after the football club decided to list in New York instead of Hong Kong.
The resounding success of the PICC IPO has already revived the Hong Kong equity market, says Pandit. AAG Energy, China Galaxy Securities and Chinalco Mining Corp International all expect to float this year.
“There was actually a lot of discussion around whether or not PICC should issue both H and A shares,” explains Tom Lanners, co-head of ECM for Asia Pacific at HSBC. “We ultimately settled for H shares only, in large part because the A-share market was struggling at the time and because the regulator was not keen on seeing large IPOs. Beside the issue of timing, this was probably the biggest decision we had to make.”
Jonathan Penkin, head of ECM for Asia ex-Japan at Goldman Sachs, says: “There was little activity within the state-owned enterprise sector due to the Chinese leadership change and because the IPO market was very quiet in 2012, PICC’s large IPO really stood out.
“The IPO attracted unprecedented demand from mainland Chinese institutions, which accounted for 66% of the cornerstone tranche of the IPO. They were a key driving force behind the success of the IPO.”
Pandit says: “The PICC Group IPO was significant precisely because it was such a large-sized transaction that performed very successfully despite a challenging and volatile backdrop in Hong Kong. Despite this volatility, the transaction was executed well on the first day of trading, the IPO was up around 7% and it has continued to move along this trend.”
Another banker adds that part of the IPO’s success stems from the company’s strong fundamentals and its positive equity story. He points out that the company spent a lot of time interacting with investors to ensure that they were informed throughout. “It became apparent pretty quickly that the IPO was going to be successful. Once we had cornerstone investors in place, the deal took on a life of its own.”
Some bankers point out that the success of the deal was instructive for the fate of the wider market. In reality, says one, the wider market was not as bad as appearances suggested. Most companies had just got their timing wrong and didn’t manoeuvre themselves efficiently through macroeconomic uncertainty.
The momentum provided by the PICC deal and others has led to a better start to this year, with investors seemingly far more willing to engage in the market.
