Kerry Stokes’ Seven Group Holdings is poised to become a major player in the world’s biggest ever initial public offering, with China’s Agricultural Bank of China set to raise more than $US22 billion when it floats next week.
AgBank confirmed overnight that its dual float (it will be listed on both the Hong Kong and Shanghai exchanges) will raise $US19.3 million, with extra share allotments taking the total raised to $US22 million.
That will make AgBank’s float the biggest in history, just in front of Commercial Bank of China’s float in 2006, which raised $US21.9 billion.
Kerry Stokes’ newly-merged investment vehicle Seven Group Holdings, which contains the Seven Network media empire and the WesTrac construction equipment business (which distributes Caterpillar equipment in parts of China and Australia), has got in on the ground floor.
It will invest $US250 million in the float, alongside a group of cornerstone investors that includes two Middle Eastern sovereign wealth funds and a number of other global banks.
Seven says the investment is “part of a broad strategy to underpin the development of Seven’s WesTrac China business and create new opportunities for Seven to leverage China’s economic growth”.
“Our decision to become a cornerstone investor in Agricultural Bank of China’s initial public offering makes sound business and financial sense,” Stokes said in a statement when Seven’s investment was announced.
“This is an investment we see delivering value and strategic return for Seven Group Holdings. We intend this investment to be a hold for the medium-term.”
Seven’s AgBank stake is more than just a hands-off investment. Under a memorandum of understanding between the two companies, the two companies will also develop financing and leasing products for WesTrac customers.
AgBank was founded by Chinese leader Mao Zedong in 1951, but was technically insolvent as recently as three years ago, with 24% of its loan classified as “non-performing”.
The bank received a $USS30 billion bailout and is now riding China’s economic boom.
One big question around the float, which is slated for July 15, is how ordinary investors will react.
China’s benchmark stock index has fallen nearly 25% since mid-April and fell sharply last week, although commentators have attributed partly as investors sold stocks to raise money for the AgBank offer.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
