Special Report: AgBank's Easter surprise showed China IPO lure

Agricultural Bank of China (1288.HK) (601288.SS), the country's third-largest bank, was asking bankers to bid for its highly anticipated initial public offering -- one that had not been expected until later in the year, or even 2011.

Within hours, every Western bank in Hong Kong was hurriedly sending teams on flights to Beijing to prepare for the pitch session of their life -- an opportunity to underwrite what could be the largest IPO ever.

A veritable Easter parade of equity capital market bankers in Beijing tried to convince AgBank's top executives they should be selected to lead and underwrite the lender's plans to go public.

This would be the IPO prize of their careers, a deal estimated at first to target $30 billion, or nearly one-third bigger than the world's largest IPO to date.

Hundreds of million of dollars in fees were at stake.

The IPO not only reflected China's rapid growth and economic prowess, but underscored as well an emerging new order of global financial institutions.

Four years ago, Chinese banks were upstarts, lumbering newcomers saddled with bad debts and seeking the advice of Western institutions. Now, China is home to the two largest banks in the world by market capitalization, hardly blinking when the financial crisis brought Western peers to their knees.

As the last of China's major banks to go public, AgBank did not seek a Wall Street group or European lender to form a strategic partnership before the IPO. Instead, those banks threw themselves at the feet of AgBank and Chinese government officials for the chance to work on such an important deal, even if it meant earning a below-rate fee.

One banker who attended the pitch session was initially struck with how organized and prepared AgBank's executives were. Then it hit him: Agbank wanted to complete the offering in July, a little over three months away.

"It was surprising in terms of how much prep work had been done. And the time line was really aggressive," said the banker. "We didn't have enough information at the time to have us determine whether or not they could pull it off by that July time frame."

With AgBank Vice President Pan Gongsheng in charge, however, they quickly learned how this would happen.

"Dr. Pan ran this deal," said another banker involved in the deal, reflecting the respect of the bankers, who all call him "Dr. Pan."

This was the same man in charge of Industrial and Commercial Bank of China's (ICBC) world record $21.9 billion public float in 2006. The stringent rules he assigned to that process, were applied to the AgBank deal as well. And then some.

BEFORE THE ROADSHOW