How Agricultural Bank of China pulled the strings on its record-breaking IPO

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By:
Lawrence White
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Eleven banks gathered in Agricultural Bank of China’s offices in early April to plan in an atmosphere of mutual suspicion how to complete an extremely difficult task. The challenge: to sell to investors what was thought of as China’s weakest big bank, to a timetable calling for unprecedented swiftness, against a backdrop of worsening global market conditions. Lawrence White reports from Beijing, Hong Kong and Shanghai on the story of the world’s biggest-ever IPO.

Pan Gongsheng: The man who pulled the strings

Pan Gongsheng: The man who pulled the strings

FRIDAY, APRIL 2 2010 was Good Friday, and most members of Hong Kong’s investment banking elite were packing their bags in anticipation of an Easter weekend break with their families. Some had already left. "I was actually in the car on the way out of town," recalls a senior equities banker. "I was already on holiday in Australia with my family," says another. Then that afternoon the call came. It was a call they had been expecting for some time, one that made them drop whatever they were doing, abandon their holidays and converge on Beijing, frantically dialing colleagues to make sure they were doing the same. It was the call summoning these bankers to an audition for the chance to work on the deal of their lives: the initial public offering of Agricultural Bank of China, the last of the country’s big-four state lenders to go public.


It looked likely to be the biggest IPO ever, and the world’s leading investment banks had been flying their chief executives out to Beijing for the previous four years cultivating contacts with ABC in preparation for this event. Being on the deal meant the likelihood of multimillion dollar fees for the banks involved, the prestige of having worked on the world’s biggest IPO, and vindication that they were deemed worthy of working on the most important China deal of the year. For Agricultural Bank of China, its stock exchange debut would mark the next step on a long road to rehabilitation, and emergence from pariah status as the last of China’s four largest banks to go public. Finally, with investors worried by bad loans in China and the country’s banks poised to raise substantial amounts of capital, the IPO would act as a referendum on China’s banking industry and the credibility of its growth story. For all parties involved, the stakes were high.

Monday, April 5, would be the Qing Ming (tomb sweeping) holiday in China, leaving just one working day, April 6, before the all-important pitch meetings began on April 7. In a way it didn’t matter: all the banks involved worked furiously over the holiday to complete their pitch books, thousand-plus-page documents they had been working on for months before the official request for proposal call came in. They knew what the outline of the RFP would look like but there were some surprises in the details. ABC wanted to see photocopies of the degree certificates and passports of the bankers who would be pitching, something that an experienced China public sector banker says he had never experienced before. There were endless questions about the possibility of other strategic relationships that investment bank and client might develop if the former were appointed on the deal. And the banks had to provide photographs of everyone in their teams for the security passes they would need once they got to ABC’s Beijing headquarters.

Banks pulled out all their big hitters to win places on the largest ever IPO, such as Deutsche Bank CEO Josef Ackermann (here with ABC chairman Xiang Junbo)

Banks pulled out all their big hitters to win places on the largest ever IPO, such as Deutsche Bank CEO Josef Ackermann (here with ABC chairman Xiang Junbo)

Over the next four months, these bankers’ lives would revolve around ABC and little else. Two figures would come to dominate their lives. Standing aside from the day-to-day execution of the deal but wielding ultimate authority on all the big decisions, there was chairman of the bank Xiang Junbo. Then corralling, cajoling, directing the dozens of bankers working on the deal would be Pan Gongsheng: veteran of the record-breaking ICBC IPO, fluent in Wall Street lingo and a Communist Party member, the executor of the chairman’s will. The bankers would battle each other ferociously, first to get on the deal and then to secure the more prestigious spots as Pan expertly played them off one another to ensure total dedication to the strict timetable required. The bankers would face the constant threat of leaks to the media from within their own ranks, a relentless schedule that could see them summoned to ABC headquarters on a minute’s notice any day of the week, and global market conditions that threatened at any moment to turn the share sale into a disaster. Some had to explain to their global chief executive why he was being kept waiting 36 hours for a meeting; others would grow alarmed as they began to suspect they were being cut out of the important meetings. For all involved, it would be a test of endurance and political skill as much as investment banking know-how.


Day-by-day account:

April 7-8: pitching
"You couldn’t win a spot on this deal at those pitch meetings," says a banker who was in them, "but we got the feeling you could certainly lose one."

April 9-13: waiting
"My sense is that who was on that deal changed 10 times in three days."

April 14: the winners announced
ABC announced which banks would be helping it to complete its transformation into a company with publicly traded shares.

April 16: the kick-off meeting
For those who won a slot on the deal there was no time for self-congratulation.

April 16- May 4: claustrophobic preparations
With nine external bookrunners working on the deal, appointing each a separate workspace within the bank proved impossible.

May 4-June 20: anchors, and tense bankers
The banks competed fiercely for ABC’s approval. 

June 20-July 1: tough questions on the road
"I recall one investor looking at chairman Xiang and saying: ‘Look I trust you, but this bank has half a million staff. How do you know one of them is not going to cause a scandal?’"

July 1-6: the mood darkens
The prospectus is an imposing 771-page document. For many would-be investors, however, one section stood out: the "risk factors" section.

July 6-August 13: the biggest deal of all time
For ABC staff, the moment represented vindication of years of diligent preparation. For investors, time will tell if they got a good deal. For bookrunners, there is the satisfaction of having worked on the biggest IPO ever. For China, the deal is merely another chapter in its remarkable economic transformation.
see also:
Pan Gongsheng interview: How Pan handled the process
ABC IPO: The cornerstones
ABC IPO: Timeline