11

IPO Of ICBC – IPO Of ICBC – The Role Of China The Role Of China International Capital International Capital Corporation LimitedCorporation Limited

Group 3

Wong Kai Yuen 043076

Kong Ka Man 043089

Lui Ching Kwan 043061

Lai Pui Ha 043074

Lee Tsui Woon 043077

Na Ka Ki 043082

22

IntroductionIntroduction

General investment bank functionGeneral investment bank function Distinguishing feature of CICCDistinguishing feature of CICC IPO of ICBC IPO of ICBC

33

The investment bank The investment bank Roles and Functions in IPORoles and Functions in IPO

ExpertiseExpertise– Market informationMarket information

TimingTiming PricingPricing

– Listing serviceListing service UnderwritingUnderwriting Private placementPrivate placement

44

Roles and functions in Roles and functions in IPOIPO Legal requirementLegal requirement

– A new applicant must appoint a A new applicant must appoint a sponsorsponsor to assist it with it listing to assist it with it listing application (Main board rule 3A.02) application (Main board rule 3A.02)

– A Main Board sponsor must be a A Main Board sponsor must be a corporation or an authorized corporation or an authorized financial institution financial institution (Main Board Rule (Main Board Rule 1.01)1.01)

55

– A Main Board sponsor must be A Main Board sponsor must be licensed or registered under licensed or registered under applicable laws to advise on applicable laws to advise on corporate finance matters corporate finance matters (Main (Main Board Rule 1.01)Board Rule 1.01)

66

UnderwritingUnderwriting

Underwriting SyndicateUnderwriting Syndicate– Lead or managing underwriterLead or managing underwriter– Underwriting dealerUnderwriting dealer

purchase the shares and redistribute purchase the shares and redistribute the shares to the investorsthe shares to the investors

– Selling groupSelling group only earns commissiononly earns commission

77

DocumentationDocumentation

Preparing the new applicant for Preparing the new applicant for listing, lodging the formal listing, lodging the formal application for listing and all application for listing and all supporting documentationsupporting documentation (Main board rule 3A.11) (Main board rule 3A.11)

88

Contents of listing documentsContents of listing documents

Statement of activeStatement of activebusiness pursuitsbusiness pursuits

The new applicant must state its business activities andThe new applicant must state its business activities andfinancial informationfinancial information(Appendix 1A to the Main Board Rules – Paragraphs 28 to 40)(Appendix 1A to the Main Board Rules – Paragraphs 28 to 40)

Statement ofStatement ofbusiness objectivesbusiness objectives

The new applicant must provide information on its general The new applicant must provide information on its general business trend, financial and trading prospectsbusiness trend, financial and trading prospects(Appendix 1A to the Main Board Rules – Paragraphs 32 to (Appendix 1A to the Main Board Rules – Paragraphs 32 to 34(1))34(1))

Use of proceedsUse of proceeds The new applicant must disclose details of its intendedThe new applicant must disclose details of its intendeduse of proceedsuse of proceeds(Appendix 1A to the Main Board Rules – Paragraphs 48 to 50)(Appendix 1A to the Main Board Rules – Paragraphs 48 to 50)

Profit forecastProfit forecast Profit forecast is not compulsoryProfit forecast is not compulsory(Main Board Rules 11.16 to 11.19)(Main Board Rules 11.16 to 11.19)

Accountants’ reportAccountants’ report • • To cover 3 financial years except for exemptedTo cover 3 financial years except for exemptedcompanies (Main Board Rule 4.04)companies (Main Board Rule 4.04)• • Can be prepared in accordance with either Hong Kong Can be prepared in accordance with either Hong Kong Financial Reporting Standards or InternationalFinancial Reporting Standards or InternationalFinancial Reporting Standards for primary listings on the Financial Reporting Standards for primary listings on the Exchange (Main Board Rules 4.11 to 4.13)Exchange (Main Board Rules 4.11 to 4.13)• • May be prepared in accordance with generally accepted May be prepared in accordance with generally accepted accounting principles in the United States of America (US accounting principles in the United States of America (US GAAP) or other acceptable accounting standards acceptable to GAAP) or other acceptable accounting standards acceptable to the Exchange under certain circumstances (Main Board Rules the Exchange under certain circumstances (Main Board Rules 19.14 and 19.39)19.14 and 19.39)

Source: Hong Kong Shock Exchange and Clearing Ltd.

99

The prospectusThe prospectus– company's business, financial statements, company's business, financial statements,

biographies of officers and directors, detailed biographies of officers and directors, detailed information about their compensation, etc.information about their compensation, etc.

Road showRoad show– promote the company prospect and the quality of promote the company prospect and the quality of

management team management team – Collect market informationCollect market information

Private placementPrivate placement– Usually before IPOUsually before IPO– Numbers of individual and financial institutionsNumbers of individual and financial institutions

1010

Greenshoe (over-allotment option)Greenshoe (over-allotment option)– right to sell additional shares right to sell additional shares – up to 15% of the original number of shaup to 15% of the original number of sha

res offered res offered

1111

CICC ProfileCICC Profile

Establish on 1995Establish on 1995

Strategic partnership among prestigiouStrategic partnership among prestigious Chinese and international financias Chinese and international financial institutions and corporations l institutions and corporations

First joint venture investment bank in CFirst joint venture investment bank in Chinahina

1212

CICC ProfileCICC Profile

Registered capital of US$125 millionRegistered capital of US$125 million

Headquartered in BeijingHeadquartered in Beijing

With offices in HK, Shanghai & ShenZheWith offices in HK, Shanghai & ShenZhenn

1313

6 Core business6 Core business

1414

ShareholdersShareholders

42.50%

35%

7.50% 7.50% 7.50%

China Construction Bank(CCB)

Morgan Stanley InternationalIncorporated

China National Investment &Guaranty Corporation(CNIGC)The Government ofSingapore InvestmentCorporation (GIC)Mingly Corporation Limited(Mingly)

1515

Business activitiesBusiness activities

Examples,Examples,

corporate restructuring corporate restructuring

Inter-bank lending and borrowing Inter-bank lending and borrowing

purchasing and selling foreign currencies purchasing and selling foreign currencies

mergers and acquisitions mergers and acquisitions

1616

CICC CultureCICC Culture

CICC culture mainly concern on:CICC culture mainly concern on:– IntegrityIntegrity– ProfessionalismProfessionalism– CreativityCreativity– CompetitivenessCompetitiveness– TeamworkTeamwork

1717

BusinessBusiness

1818

CICC BusinessCICC Business

1919

Investment Banking Investment Banking DepartmentDepartment

IBD services include :IBD services include :1.1. Equity financingEquity financing

2.2. Debt financingDebt financing

3.3. Corporate restructuringCorporate restructuring

4.4. Mergers and acquisitions in both Mergers and acquisitions in both domestic, international capital market domestic, international capital market

5.5. Asset securitizationAsset securitization

2020

Equity FinancingEquity Financing

Equity Financing service includes :Equity Financing service includes :– IPOIPO– follow-on offeringsfollow-on offerings– private placementsprivate placements

Industrial Industrial and and CommerciCommercial Bank of al Bank of ChinaChina

Year Year 20062006

The largest H shares IPO so fThe largest H shares IPO so far, raising about US$14 billiar, raising about US$14 billion (pre-Greenshoe).on (pre-Greenshoe).

2121

Debt financingDebt financing

Debt financing service includes :Debt financing service includes :– institutional bondsinstitutional bonds– convertible bondsconvertible bonds– short-term financing bondsshort-term financing bonds– financial bondsfinancial bonds

2222

StrengthsStrengths

2323

Lead underwriterLead underwriter

Leading Chinese enterprises to access oveLeading Chinese enterprises to access overseasrseas – CICC has led four of the top five A-share IPOs CICC has led four of the top five A-share IPOs

in domestic equity market.in domestic equity market.– CICC has led all top five debt (including convCICC has led all top five debt (including conv

ertible debt) offerings in domestic debt markertible debt) offerings in domestic debt market.et.

2424

Bookrunner Ranking for Bookrunner Ranking for Overseas EquityOverseas Equity Iss Issuing of Chinese Enterprises Since 1997uing of Chinese Enterprises Since 1997

Note ： The ranking was made by allotting the issuing size averagely between bookrunners. Information Source ： Equityware, up to December 31, 2005

2525

Bookrunner Ranking for Bookrunner Ranking for Overseas IPO IssuinOverseas IPO Issuingg of Chinese Enterprises Since 1997 of Chinese Enterprises Since 1997

Note ： The ranking was made by allotting the issuing size averagely between bookrunners. Information Source ： Equityware, up to December 31, 2005

2626

TopTop Overseas IPO of Chinese Enterprises Overseas IPO of Chinese Enterprises

Since 1997Since 1997

2727

Professional Professional investment team investment team Senior Management with Global ExperienSenior Management with Global Experien

cece – even served as Managing Director in a leadineven served as Managing Director in a leadin

g U.S. investment company g U.S. investment company – can contribute more knowledge can contribute more knowledge – help the CICC has a good operation managehelp the CICC has a good operation manage

ment ment

2828

Extensive Experience in Domestic Extensive Experience in Domestic MarketMarket – with outstanding performance records and with outstanding performance records and

industry reputation industry reputation Management Group with Excellent Management Group with Excellent

Professional Attributes Professional Attributes – have good reputations in financial fieldhave good reputations in financial field– without any misdemeanor records.without any misdemeanor records.

2929

Case study: IPO of ICBCCase study: IPO of ICBC

How does CICC Help ICBC to issue How does CICC Help ICBC to issue IPO?IPO?

3030Source : HKEx

3131

Planning and PreparationPlanning and Preparation

Selecting the sponsor, advisers Selecting the sponsor, advisers and underwritersand underwriters

IPO of ICBC is the world’s Biggest oneIPO of ICBC is the world’s Biggest one near $300 million banking fees near $300 million banking fees

→ → CompetitionCompetition

CICC Success as Chief investment CICC Success as Chief investment bankbank

3232

Role of CICCRole of CICC

Joint global coordinatorJoint global coordinator Joint bookrunnerJoint bookrunner Joint sponsor for both H and A shareJoint sponsor for both H and A share

Source : HKEx

3333

Preparing the Preparing the timetabletimetable

Specific timetable of the issue of IPO was Specific timetable of the issue of IPO was prepared on May prepared on May

Timetable of the Initial Public OfferingTimetable of the Initial Public Offering

Year 2006Year 2006

JanuaryJanuary establish non-exclusive strategic cooperationsestablish non-exclusive strategic cooperations

MarchMarch Select the Joint Lead ManagersSelect the Joint Lead Managers

25-Mar25-Mar Listing application have been acceptedListing application have been accepted

22-Jun22-Jun The advance booking form had submittedThe advance booking form had submitted

18-Jul18-Jul The Formal application for listing was passedThe Formal application for listing was passed

AugustAugust The underwriting syndicate prepare for the Road The underwriting syndicate prepare for the Road ShowShow

21-Sep21-Sep ICBC was under the hearing by Listing ICBC was under the hearing by Listing CommitteeCommittee

9-Sep9-Sep Road Show was startedRoad Show was started

16-Oct16-Oct Write application and eIPO was startedWrite application and eIPO was started

19-Oct19-Oct Write application and eIPO was endedWrite application and eIPO was ended

20-Sep20-Sep Stock Price determinedStock Price determined

27-Oct27-Oct Both H share and A share listedBoth H share and A share listed

3434

StructuringStructuring

Capital Share :Capital Share : Before Global OfferingBefore Global Offering

Number of Share

MOF44%

SSF5%

Goldman Sachs6%

Allianz2%

AmericanExpress

0%

Huijin43%

MOF

Huijin

SSF

Goldman Sachs

Allianz

American Express

Source : HKEx

3535

StructuringStructuring

Upon Completion of Global Upon Completion of Global Offering and A Share Offering Offering and A Share Offering

Number of Share

A shares issued4%

SSF5%

MOF37%

Huijin36%

Allianz2%

AmericanExpress

0%

Goldman Sachs5%

H shares issued11%

MOF

Huijin

SSF

Goldman Sachs

Allianz

American Express

H shares issued

A shares issued

Source : HKEx

3636

The Listing Application The Listing Application

On 22On 22ndnd June : June : Submit the advance booking form Submit the advance booking form

(Form A1 in Appendix 5 to the Main (Form A1 in Appendix 5 to the Main Board Rules) with a timetable to HKExBoard Rules) with a timetable to HKEx

On 18On 18thth July : July : Submit the Formal application for Submit the Formal application for

listinglisting

3737

The Listing ApplicationThe Listing Application

On 21On 21stst September : September : Hearing by Listing CommitteeHearing by Listing Committee Obtaining approval from the Obtaining approval from the

Listing Committee of the Listing Committee of the ExchangeExchange

3838

Targeting and Contacting Targeting and Contacting Investors Investors

Road showRoad show Over the world like Singapore and some Over the world like Singapore and some

European countriesEuropean countries

Road Show in Hong KongRoad Show in Hong Kong Clearing up nonperforming loans of the Clearing up nonperforming loans of the

bankbank

3939

Private PlacementPrivate Placement

Investors in Hong KongInvestors in Hong Kong HK$27.2 billion worth of shares HK$27.2 billion worth of shares 27 percent of H shares.27 percent of H shares.

Li Ka-shing - HK$1.6 billionLi Ka-shing - HK$1.6 billionLee Shau kee - HK$1.6 billionLee Shau kee - HK$1.6 billion

Overseas investorsOverseas investors GIC Direct Investments - HK$2.8 billionGIC Direct Investments - HK$2.8 billion

4040

The offering The offering prospectusprospectus

16/10/2006 – 19/10/200616/10/2006 – 19/10/2006White Application Form + ProspectusWhite Application Form + Prospectus

27/10/2006 Listed Date27/10/2006 Listed Date

Prospectus distributionProspectus distribution

1.1. HSBCHSBC2.2. ICBCICBC3.3. Hang Seng BankHang Seng Bank4.4. Bank of China LimitedBank of China Limited5.5. Standard Chartered Bank LimitedStandard Chartered Bank Limited

4141

e-IPOe-IPO

www.eipo.com.hk www.eipo.com.hk The first H share allowing Write AppliThe first H share allowing Write Appli

cation though eIPOcation though eIPO Main difference : Main difference :

- check account are not necessary- check account are not necessary

4242

Price DeterminationPrice Determination

Set between 1.95 and 2.23 times Set between 1.95 and 2.23 times 2006 price-to-book value2006 price-to-book value

Deutsche Bank : pricing will be up Deutsche Bank : pricing will be up to 2.9 times price-to-book valueto 2.9 times price-to-book value

CICC : the fair value should be CICC : the fair value should be about 2.31 times 2006 price-to-about 2.31 times 2006 price-to-book value book value

4343

StabilizationStabilization

Strategic investors agreed not to Strategic investors agreed not to sell / dispose / transfer any shares sell / dispose / transfer any shares for certain period of timefor certain period of time

Lock-up period Lock-up period Private Placement - 12 monthsPrivate Placement - 12 months

– Agree to inform before disposeAgree to inform before dispose

Strategic investors - 3 years Strategic investors - 3 years – Only up to 50% of the share were Only up to 50% of the share were

permitted to sell / dispose / transferpermitted to sell / dispose / transfer

4444

ConclusionConclusion

4545

Main FunctionMain Function

Giving AdviceGiving Advice– When to issueWhen to issue– How manyHow many– What priceWhat price

Filing DocumentsFiling Documents– ProspectusProspectus

UnderwritingUnderwriting– Road ShowRoad Show

4646

IPO issue processIPO issue processMarchMarch Select Investment bankSelect Investment bank

MayMay Detail planning on the IPO scheduleDetail planning on the IPO schedule

JulyJuly 1818th th Apply for issuing stock in HKEx Apply for issuing stock in HKExAugAug Formal Issuing Road showFormal Issuing Road show

SepSep 2121stst Listening by HKEx Listening by HKExOctOct 1616thth IPO Open IPO Open

1919thth IPO Close IPO Close2020thth Expected price determination date Expected price determination date2626thth Results announcement date Results announcement date2727thth Cheques refunded Cheques refunded2727thth Listing of Shares Listing of Shares

4747

Issue ParticularsIssue Particulars

Industry sectorIndustry sector BankingBanking

Listing categoryListing category MainboardMainboardMajor ShareholdersMajor Shareholders MOF 43%MOF 43%

Total shares outstanding (mn)Total shares outstanding (mn) 327,822327,822

H share issue price (HK$)H share issue price (HK$) 2.56 – 3.072.56 – 3.07

H share total offer for size (HK$mH share total offer for size (HK$mn)n)

90,601 – 108,65090,601 – 108,650

H shares offered for placement (mH shares offered for placement (mn)n)

33,621.4533,621.45

H shares offered for IPO (mn)H shares offered for IPO (mn) 1769.551769.55

Market cap. of shares (HK$mn)Market cap. of shares (HK$mn) 839,000 – 839,000 – 1,006,4001,006,400