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AIG, others to take up half of PICC €2.8 billion HK IPO

Chinese state-owned insurer PICC Group has secured pledges from American International Group – AIG – and other investors to buy about half of its up to $3.6 billion (€2.8 billion) IPO, set to be the biggest in Hong Kong in two years.

The long-awaited offering is set to be priced on November 30. Underwriters have revised down the company valuation and the IPO size, sources with direct knowledge of the deal said, underscoring the tough environment for fundraising and PICC’s need to boost its capital base to supportbusiness growth.

People’s Insurance Company (Group) of China, one of China’s largest insurers, is tapping the Hong Kong equity market at a time when IPO volumes in the financial centre have tumbled more than 80 per cent.

PICC will be the biggest Hong Kong IPO since another insurer, AIA Group Ltd, raised $20.5 billion in 2010.

The company secured $1.85 billion in commitments from 17 cornerstone investors as varied as Chinese utility State Grid Corp, the country’s leading gold miner Zijin Mining Group, defence contractor Spacechina and China Life Insurance Co Ltd, the sources said.

So-called cornerstone investments in IPOs are unique to Asia, where large and well-established investors are guaranteed big allotments in return for holding their shares for a certain period of time, giving investors confidence in the deal.

US insurer AIG was added to the list of cornerstone investors who initially signed up, pledging $500 million to the IPO, sources said.

The list is still subject to last-minute changes. French reinsurer Scor and Tokio Marine Holdings are among the global companies who have committed to buy PICC shares.

A record 17 banks have been roped in to sell the offer, which is being marketed to global institutions.

PICC’s listing comes at a time when the volume of new offerings in Hong Kong has plunged, with IPO activity likely to shrink to its lowest since 2008 as investors shun new deals due to volatility caused by Europe’s debt troubles.

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