China’s greatest IPO in years raises a $9 billion query for Goldman Sachs and its rivals

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Goldman Sachs, JPMorgan and different Western banks have spent months lobbying to work on one of many greatest inventory listings in Chinese language historical past.

The deliberate Shanghai itemizing of a $9 billion Swiss agricultural chemical firm Syngenta appears to be a dream ticket for banks: a big worldwide firm that has current relationships with world establishments.

However as rising geopolitical stress unravels US-China commerce ties, banks could not even be capable to take part, reflecting the quickly altering enterprise panorama on the earth’s second-largest financial system.

“We need to be an element” of the preliminary public providing, mentioned an Asia-based banker at a worldwide agency. However “we all the time have the query mark: can we finally work on this or not?”

Syngenta’s proprietor for the previous six years, state-owned ChemChina, is on a US authorities watch listing of corporations with shut ties to China’s navy. International banks are asking legal professionals and political consultants if they will or needs to be on the listing, however most do not have a transparent reply.

Syngenta’s itemizing “is the embodiment of how tough it’s to achieve China from a monetary companies standpoint,” mentioned Han Lin, China nation head at advisory agency The Asia Group.

“If you cannot even do [the IPO of] a longtime worldwide agency with a protracted historical past, what hope is there of collaborating in native offers?”

A greenhouse at a Syngenta biotechnology center in Beijing
A greenhouse at a Syngenta biotech middle in Beijing © Reuters

This yr, international banks have participated in simply $297 million in new listings in China, or 1.2 % of the whole, placing them on observe for the smallest share of the annual complete since they started working within the Chinese language securities sector. nation in 2009. , in line with Dealogic information.

The freeze has been particularly exhausting on US bankswhich didn’t land spots in a single mainland IPO in 2023, regardless of a complete of $26 billion being raised this yr.

If profitable, Syngenta’s public providing would be the fourth largest itemizing in mainland China.

It has taken years to materialize. ChemChina, which achieved the biggest exit acquisition ever by a Chinese language firm when it purchased Syngenta in 2017, tried to listing it earlier however was delayed by the pandemic.

This yr, Syngenta dropped plans to listing on Shanghai’s technology-focused Star board after it was rejected by the alternate with out clarification.

The corporate lastly obtained the inexperienced gentle from a Shanghai Inventory Trade itemizing committee this month to listing 20 % of the corporate on the alternate’s principal board. If Syngenta achieves its aim of elevating 65 billion yuan ($9.1 billion), it will rank as one of many greatest listings in Chinese language historical past, in line with Dealogic information.

IPO fundraising bar chart (Rmb bn) showing Syngenta on track for fourth largest IPO on record in mainland China

Bankers from Goldman Sachs, JPMorgan, Morgan Stanley, UBS and HSBC, all of whom have funding banking companies on the mainland, have been pushing for roles on the listing, for which a roadshow might start in just a few weeks, mentioned a number of individuals with data of the method.

“Even given the connection between the USA and China, we stay caught to our technique” of attracting worldwide buyers to China, mentioned an government from one of many banks.

Western banks are notably interested in the itemizing as a result of it will place them properly to win extra enterprise if the corporate had been to hold out a secondary itemizing in London, Zurich or New York, an possibility that individuals near the corporate have mentioned remains to be on the desk.

The primary promoting level of worldwide banks is their potential to draw worldwide buyers, resembling hedge funds and sovereign wealth funds. “It is a Swiss firm,” mentioned a banker with data of the method. “In case you are a Chinese language investor, you wish to see international funding. It could offer you extra consolation.

Lately, in October, banks resembling Citi, Morgan Stanley, JPMorgan and HSBC suggested the Swiss agency on a $500 million bond situation in Hong Kong.

Nevertheless, Syngenta’s IPO prospectus is simply out there in Mandarin, and no Western financial institution has been publicly appointed to even minor fees. Syngenta and the banks declined to remark.

In 2021, when Covid-19 restrictions prevented high-end Western bankers from touring to the mainland for in-person shows, Syngenta named China Worldwide Capital Company, Financial institution of China Worldwide and CITIC Securities as prime underwriters and prime distributors.

One drawback for Western banks is the potential problems of the extension of US sanctions.

ChemChina is on a US Workplace of Overseas Belongings Management listing, launched throughout President Donald Trump and amended underneath the Biden administration, that stops US buyers from shopping for or promoting public securities in listed corporations that, in line with Washington, they’re a part of a Chinese language firm. military-industrial advanced.

Syngenta is just not on the listing and, as a separate entity, is just not coated by ChemChina’s restrictions, which suggests banks should not legally barred from advising it, mentioned Benjamin Kostrzewa, former deputy normal counsel for the Workplace of the US Commerce Consultant. USA and lawyer for Hogan Lovells in Hong Kong.

“Nevertheless it might draw some scrutiny from policymakers in Washington who’re keen to forestall American corporations from supporting corporations related to the Chinese language navy.”

It is not clear if Western banks, particularly American ones, will be capable to get far sufficient within the course of to have to fret about such questions.

Executives from two US companies mentioned they’d make the ultimate choices on whether or not they can act on the deal if they really get firm mandates to take action.

In the meantime, its Asia-based bankers are caught in limbo. “Will we launch it one hundred pc all-in, or 80 % all-in? [our ability]?” mentioned one of many bankers. “You most likely would not be all in.”

Extra reporting by Arjun Neil Alim in London

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