Bank of China's $9.8 Billion Flotation Sparks Fees Frenzy for Investment Banks

Strategic Insights -

As Bank of China prepares to launch its US$9.8 billion flotation in Hong Kong, the leading investment banks driving the deal are set to reap an estimated US$250 million in fees. Goldman Sachs and UBS are working alongside Bank of China's own investment bank to make the listing a reality, which has the potential to be the biggest Chinese float ever. The move comes after a strong demand from investors, causing the bank to double its original plan of listing $4 billion in stock to over $9.8 billion.

Key Takeaways:

  • Goldman Sachs and UBS will share an estimated US$250 million in fees from the Bank of China flotation.
  • The deal has the potential to be the biggest Chinese float ever, eclipsing the $9.2 billion raised by the China Construction Bank last year.
  • The Bank of China listing will pave the way for the expected listing of the Industrial and Commercial Bank of China (ICBC), the country's biggest bank.
  • The ICBC flotation is expected to raise between $9 billion and $10 billion.
  • Bank of China's listing will also cement Royal Bank of Scotland's position as one of the biggest winners among foreign investors, with an estimated profit of over $1.6 billion on its $1.6 billion investment.
  • Goldman Sachs will retain its position as the top stock underwriter in non-Japan Asia Pacific this year.
  • The bank was left out of the team that will float ICBC, with the spoils going to China International Capital Corporation, Credit Suisse, Deutsche Bank, Merrill Lynch, and ICBC's own investment banking arm.
  • Bank of China originally planned to list $4 billion in stock but has more than doubled the amount to be offered due to strong demand from investors.
  • The bank will offer more than 26 billion shares to investors, priced at between HK$2.50 (17p) and HK$3.

Statistics:

  • Estimated fees for Goldman Sachs and UBS: US$250 million
  • Potential size of Bank of China flotation: US$9.8 billion
  • Expected profit for Royal Bank of Scotland: >$1.6 billion
  • Estimated size of ICBC flotation: $9-10 billion
  • Number of shares to be offered by Bank of China: >26 billion
  • Price per share: HK$2.50 - HK$3 (17p - 22p)

Sources:

  • The Times, 2006