Goldman, UBS Warburg prep Bank of China


The Bank of China building (c) dominates Hong Kong's Central district, looming over the Legislative Council

By Alex Frew McMillan

HONG KONG, China (CNN) -- Investment banks Goldman Sachs and UBS Warburg are conducting the roadshow this month for the $3 billion stock sale of the Bank of China Hong Kong.

The offering is on track for July 25 and marketing is under way, investment bank sources said. The Bank of China will be the first of China's Big Four banks to sell stock to the public.

The investment banks are the lead underwriters taking the Hong Kong unit to market, in conjunction with the Bank of China itself.

The Bank of China first put the mandate out in 2000 for the investment banks to sell stock in its Hong Kong subsidiary.

UBS Warburg cites quiet-time rules

The Bank of China plans to raise about $3 billion through the sale, technically called an initial public offering. An announcement may come as early as this weekend.


The headquarters building (top right) sits at the heart of Hong Kong island, boosting BOC's retail brand and interest in the sale

UBS Warburg is readying the offering but declined to elaborate, saying it is in a quiet period.

"That's in the public domain," spokesman Mark Panday told CNN on Tuesday. "But I can't make any official comment." He referred questions to the Bank of China.

The Bank of China has officially denied that it has set a deadline for the sale. It did so again Tuesday.

"It is not decided yet," spokeswoman Clarina Man told CNN. "It is on schedule."

No prospectus to public yet

No prospectus has been made available to retail investors yet. But sources say the bank is keen to push ahead despite poor stock-market conditions.

Goldman Sachs has a track record of underwriting big stock sales for China-related companies. It helped float PetroChina, the first Chinese-owned oil company to go public overseas.

Goldman also underwrote the IPO of China Telecom's Hong Kong subsidiary, now known as China Mobile. That was the first Chinese-owned cell-phone company to go public overseas.

This would be the most significant offering to date in China for UBS Warburg. The Swiss investment bank has been involved in Chinese Eurobond issues.

But it has not been involved in a China-oriented stock offering of this magnitude.

Morgan Stanley in the syndicate

U.S. investment bank Morgan Stanley is not one of the lead underwriters. It was the first overseas investment bank to form a joint venture with a Chinese investment bank, China International Capital Corp. (CICC).

But that links Morgan Stanley with CICC's parent, China Construction Bank. It will be in the syndicate as a co-manager of the Bank of China offering, providing research after the sale.

Morgan Stanley may wait to lead underwrite a China Construction Bank offering. The Bank of China wants to take its own company public without help from another Chinese investment bank, two investment-bank sources stated.

Morgan Stanley led the stock sale of China Unicom, the second cell-phone company to go public after China Mobile.

Questions about sale

The U.S. investment bank also headed oil company Sinopec's IPO, after PetroChina went public.


Critics such as author Gordon Chang have questioned selling stock in China's banks to the public, a step he says halts reform

The Bank of China offering is drawing heavy interest because it is viewed as the best-run bank in China. Some critics contend it should not go public without resolving a series of scandals (full story).

It posted a 47 percent plummet in profits for 2001, as its bad loan provisions soared (full story).

Risk premium aside, stock watches say the bank will draw heavy retail interest because of its strong brand. It pulled a planned U.S. offering because of the paperwork involved.

The Bank of China is also likely to lead the way for other Chinese banks, as they prepare to open their doors for international competition under the World Trade Organization.