More than three months after the initial public offering of Agricultural Bank of China, disagreement among the investment banks involved on the deal means that they have still not received the discretionary portion of their fees.
Euromoney understands from sources involved with the negotiations that a resolution to the matter was expected “within days”, but one source says that they have been here before and that delays keep pushing back the payday.
The banks involved in the H share portion of the deal – Goldman Sachs, Morgan Stanley, CICC, JPMorgan, Macquarie, Deutsche Bank and ABC’s investment bank division – have all received the bulk of their fees. However, under the terms of the IPO, each bank is due an additional sum that was to be decided by ABC based on its performance throughout the process. One source estimates that in the case of his own firm this sum could represent up to 30% of the fees already paid.
Euromoney spoke to the man at ABCin charge of the IPO process in September, Pan Gongsheng. He expressed some frustration that the fee problem had not been fully resolved but said he did not wish to make any specific comments.
As Euromoney understands from non-ABC sources, the problem is that the process involves ABC ‘whispering’ the likely size of each bank’s discretionary fee to that firm only. At that point, the banks pull out all the stops to influence their share of the unvarying total sum, which means in turn that no final decision is easily reached, even though ABC’s stock has been trading since July 16.
Getting the banks to compete with each other for a share of the discretionary fee pool, in conjunction with ABC’s decision to delay the appointment of the key global coordinator role until unusually late, was designed to encourage the investment banks to put their utmost efforts into the deal. Bankers who worked on it say there was an unusual amount of emphasis placed on recording the performance of each bank in every meeting, although ABC also worked hard to try and minimize inter-bank conflicts.
An ABC spokesperson emphasized that it “had a pleasant cooperation with our investment banks and they’ve got reasonable fees from us.”