With a new formula and an enlarged pool of participants, Deals of the Year 2007 has for the first time declared a global winner and five regional winners from the pick of the deals in 85 countries around the world. Both international and local banks have brought an extraordinary wealth of deals to the attention of The Banker’s judges. The next pages are dedicated to the well deserved accolades.
GLOBAL WINNER
CHINA
The Deal: Industrial and Commercial Bank of China’s $21.9bn IPO
CICC, ICEA and Merrill Lynch were joint global co-ordinators, joint bookrunners and joint sponsors. Deutsche Bank and Credit Suisse were bookrunners. Goldman Sachs provided financial advice.
The deal that grabbed headlines around the world and that brought The Banker’s judges to a unanimous conclusion on the Deals of the Year’s global winner is Industrial and Commercial Bank of China’s (ICBC) initial public offering (IPO). With its $21.9bn offering on the Hong Kong and Shanghai stock exchanges, the IPO is the world’s largest to date.
The huge success with both international and domestic investors, in the institutional and retail spaces, mark a remarkable turnaround for a bank that two years ago had a non-performing loan ratio of more than 27% and was considered one of the most problematic large state banks in China.
The institutional book was 50 times covered, equal to about $350bn-worth of orders, setting a record for an Asian deal, while the $54.33bn subscriptions on the retail offer represented the highest value ever for a Hong Kong IPO.
At the end of the first trading day, ICBC’s total market capitalisation reached $139.1bn, based on a closing price of HK$3.52 ($0.45) for the shares traded on the Hong Kong Stock Exchange, and Rmb3.28 ($0.42) for the shares listed on the Shanghai Stock Exchange.
The substantial differences in the Hong Kong and Shanghai markets in terms of listing process, investor profile, underwriting timetable and other requirements provided additional complexity to the transaction.
The list of milestones and firsts that the deal established is long. The deal was the first concurrent global offering of H shares (Chinese shares on the Hong Kong Stock Exchange) and of A shares (renminbi-quoted shares in a Chinese market). It was the largest H share offering and the largest A share offering. It also generated the largest demand among offerings of Chinese financial institutions and was the first deal to include Chinese corporate investors in global institutional allocations.
As a result of its IPO, ICBC becomes the world’s fifth largest bank by market capitalisation (preceded by Citi, Bank of America, HSBC and JPMorgan) and Asia’s largest public traded company. It is Asia’s largest commercial bank, with more than 2.5 million corporate banking customers and more than 18,000 branches. It is also China’s largest electronic banking service provider.
“The successful listing of ICBC in both Shanghai and Hong Kong’s capital markets is a milestone in the reform of Chinese banking sector,” says Jiangqing Jiang, ICBC’s chairman. “Fully integrated in capital markets at home and abroad, ICBC not only opened a new chapter in its endeavour of building into a modern financial group, but also recorded an unprecedented A-share and H-share concurrent listing. The deal turned out to be the largest IPO ever for a single stock in the world, bringing about fresh opportunities and dynamics to capital market.
“Along with the further deepening of China’s financial reform, ICBC is dedicated to building a brand new comprehensive business platform and maximising shareholders’ interest and corporate value. It aims to enhance corporate governance, strengthen risk management, promote innovation capability, provide better service and upgrade human resources in the future.”
REGIONAL WINNERS AFRICA/ SOUTH AFRICA The Deal: $1.1bn Kumba Resources unbundling and Eyesizwe Consortium black economic empowerment transaction
Rand Merchant Bank advised Kumba, was lead manager and jointly underwrote the funding requirements with Nedbank. Deutsche Bank advised Anglo American (Kumba Resources’s parent).
In the largest ever black economic empowerment deal in South Africa, Anglo American’s subsidiary Kumba Resources was split up and a majority stake in its non-iron ore assets was sold to create the largest black-owned and managed mining company in the country: Exxaro Resources.
Black economic empowerment (BEE) is the redress of economic inequalities between white South Africans and the previously disadvantaged black majority, often involving the sale of equity stakes to black shareholder groups. The challenge of such deals is to minimise shareholder value destruction for the seller and at the same time to deliver sustainable funding solutions to buyers. Specific to this deal, bankers had to devise ambitious funding structures for the R6.5bn ($900m) purchase price when the BEE consortium has only R1.4bn in equity.
The success of the transaction lay not just in meeting the significant funding requirements of the deal, with 100% of distribution going to South African investors, but also in meeting the objectives of various stakeholders,including the government, tax authorities and, not least, Anglo American shareholders. In the process, a novel funding structure was devised that ensured immediate dividend flows to the new black owners of Exxaro Resources and avoided an undue debt burden.
AMERICAS/ BRAZIL The Deal:CVRD’s $19.3bn acquisition of Inco and $18bn senior acquisition facility ABN AMRO, Credit Suisse, Grupo Santander and UBS advised CVRD on the acquisition while Goldman Sachs, Morgan Stanley and Royal Bank of Canada advised Inco. ABN AMRO, Grupo Santander, Credit Suisse and UBS were joint mandated lead arrangers and bookrunners on the acquisition financing. Brazilian metal producer Companhia Vale do Rio Doce’s (CVRD) $19.3bn acquisition of Inco, a Canadian nickel producer, is the largest cross-border takeover involving a Latin American company. The unique execution, structure and valuation of the transaction allowed CVRD to beat rival bids while strengthening its position as a raw material provider in the steel industry. The takeover was also the largest acquisition ever by an emerging market company and the $18bn acquisition financing was the largest loan ever to an emerging market corporate. The success of the acquisition facility marked a milestone in the development of emerging markets. The size, pricing, scope and smooth execution of the transaction reflect a Brazilian market at its most mature stage ever. The loan was two times oversubscribed and it was the largest syndicated loan ever to an emerging market corporate.
EASTERN EUROPE/ RUSSIA The Deal: Rosneft’s $10.8bn IPO Dresdner Kleinwort, JPMorgan, ABN AMRO Rothschild and Morgan Stanley were joint global co-ordinators and joint bookrunners; Sberbank acted as co-ordinator of the Russian offering and senior co-lead manager; Goldman Sachs was senior co-lead manager while Barclays Capital, CA IB, Daiwa, Fortis, ING and NatIxis were co-lead managers. Rosneft’s IPO in Moscow and London was the largest ever in Russia and the largest listing on the London Stock Exchange last year. The highly complex IPO received a high valuation despite volatile market conditions and political uncertainty. The transaction exceeded expectations with an offer price of $7.55, which gave the former state-controlled oil giant a valuation of nearly $80bn. Underwriters had to overcome concerns on corporate governance and potential litigation against the company and were faced by the lack of support from many of Europe’s top institutional investors. It was the presence of strategic investors that eventually attracted institutional investors, too. The transaction is a landmark deal for Russia and the oil sector, and is the largest retail offering in the country.
WESTERN EUROPE/ LUXEMBOURG The Deal: €35.2bn merger of Arcelor and Mittal Steel Mittal Steel was advised by Citi, Credit Suisse, Goldman Sachs, HSBC and Société Générale.
Arcelor was advised by BBVA, BNP Paribas, Calyon, Deutsche Bank, Hawkpoint Partners, Merrill Lynch, Morgan Stanley, Grupo Santander and UBS. Lazard, JPMorgan and Petercam Securities advised Arcelor’s sellers. No regular reader of the financial press would have missed the aggressive public relations campaign staged by both parties involved in this deal. After a highly public defence by Arcelor against the hostile attack of Mittal Steel, this landmark transaction culminated in a friendly merger of equals with an enterprise value of €35.2bn. The deal contributed to the consolidation of the fragmented steel industry, where both parties fought long and hard before reaching an agreement. Its size overshadowed all previous steel transactions and created the largest and most diversified steel company in the world. The transaction was also the third largest European mergers and acquisitions (M&A) deal in 2006 and required the involvement of six regulators: Luxembourg, France, Belgium, Spain, the US and Netherlands.
MIDDLE EAST/ UNITED ARAB EMIRATES The Deal: Nakheel Group’s $3.52bn sukuk Al Ijara Dubai Islamic Bank and Barclays Capital were joint lead managers and joint bookrunners.
The transaction was the largest sukuk (Islamic bond) issue to date with a unique structure that is the first of its kind in both Islamic and conventional capital markets. It was also among the 10 largest convertible offerings globally. The sukuk for the government-owned Nakheel Group, United Arab Emirates’ largest property developer, was structured in accordance with Islamic shariah rules and documented according to Eurobond standards (Reg S). Dubai Islamic Bank achieved a high quality order book that was oversubscribed by two-and-a-half times, allowing the deal to be upsized from $2.5bn to $3.52bn. It attracted a diversified global investor base with demand being exceptionally strong from Middle Eastern investors followed by those in Europe, Asia and the rest of the world. The sukuk was designed to capitalise on the high level of demand in the Middle East for IPOs by incorporating a guaranteed 25% allocation to investors in any qualifying public offering undertaken by the Nakheel Group, which is owned by Dubai World.
