CCB flotation heralds China and Hong Kong IPO goldrush

China and Hong Kong have become global hot spots for IPOs following the recent closure of the $8bn (£4.52bn) IPO of the China Construction Bank (CCB).

Freshfields Bruckhaus Deringer and Herbert Smith have successfully advised on the landmark IPO and listing of the bank on the Hong Kong Stock Exchange (HKSE).

The IPO is the largest to date for a Chinese issuer, the world’s largest IPO this year and the largest Asian IPO since 1998. It is also the biggest-ever listing on the HKSE. CCB is the first of the big four state-owned banks to undertake an IPO.

Herbert Smith advised CCB on the IPO, while Freshfields advised joint bookrunners Morgan Stanley, China International Capital and Credit Suisse First Boston, as well as joint sponsors China International Capital Corporation, Morgan Stanley and CCB International Capital.

Meanwhile, law firms are flocking to the Asia-Pacific region to bag their piece of the IPO action.

According to figures released by Thomson Financial, there have been 45 IPOs completed in China during the past 12 months with a total value of more than $13bn (£7.34bn).

US firm Baker & McKenzie (B&M) topped the list of legal advisers for managers with a market share of 8.6 per cent, raising almost $1.2bn (£678m).

B&M was closely followed by Haiwen & Partners, which was manager legal adviser for five IPOs at a total value of $1.07bn (£604.5m). Freshfields ranked high on the list of manager legal advisers and issuer legal advisers, raising a total of $752m (£424.9m). Norton Rose ($275m (£155.4m)) and Simmons & Simmons ($143m (£80.8m)) also featured prominently.

In Hong Kong there were 23 IPOs, with Linklaters taking more than 20 per cent of the issuer legal advisory work, some $1bn (£565m) worth of deals.

Shearman & Sterling topped the manager legal adviser list, advising on deals worth $885m (£500m).

Linklaters Asia corporate head Simon Davies said the volume of complex IPO work in China and Hong Kong during the past year had been “extraordinary”.

“China’s economy has been growing at such a rate that economists are predicting it will be bigger than the US by the year 2030,” said Davies. “I’ve been in Asia for more than 10 years and I’ve never seen it this busy before; and it’s not just the volume but the complexity of the work that’s so exciting.”

Freshfields partner and head of the firm’s China securities practice Teresa Ko led the team on the CCB transaction, assisted by Beijing-based partner Christopher Wong.

For Ko, who has been recognised by the industry’s elite as the ‘Queen of IPOs’, her role on the landmark CCB IPO beat her previous record, which was set in 2001 with the $5.3bn (£2.99bn) IPO of China Unicom.

Ko told The Lawyer that Freshfields secured the work following a highly competitive beauty parade.

“There was the usual tendering process and, because of the nature of the industry, it was very competitive,” she said. “It kicked off in March 2004 and it’s taken a great deal of hard work to get to this point.”

Ko said that, while China’s IPO market appeared to be flourishing, it was unlikely to last forever.

“We’ve had a couple of phenomenal years in terms of IPOs,” she said. “After Sars, it seems that people have finally regained confidence. To us, this was more than a landmark transaction in some ways – it actually marked a major milestone in the reformation of the PRC [People’s Republic of China] banking and financial sector.

“It’s been a matter of striking when the iron’s hot… We’re going into 2006 with confidence, but inevitably there has to be a caution that, just like the ebb and flow of any economy, [the IPO market] can’t continue to grow at the same rate that it has been.”

Despite the warning, there are no signs of China’s IPO market slowing down just yet. Industry experts are predicting CCB’s IPO to be followed by the Bank of China next year and the Industrial and Commercial Bank of China in 2007.

Chinese IPOs manager legal adviser, 28 Oct 2004-28 Oct 2005
Rank Manager adviser Value $m Value £m No of issues
1 Baker & McKenzie 1,166.7 659.2 2
2 Haiwen & Partners 1,075.0 607.3 5
3 Simpson Thacher & Bartlett 1,033.8 584.1 4
4 Commerce &Finance Law Offices 348.9 197.1 4
5 Sidley Austin Brown 346.7 195.9 2

    Source: Thomson Financial

Chinese IPOs issuer legal adviser, 28 Oct 2004-28 Oct 2005
Rank Issuer adviser Value $m Value £m No of issues
1 King & Wood 1,021.8 577.3 2
2 Herbert Smith/ Gleiss Lutz/Stibbe 918.7 519.0 2
3 Sullivan & Cromwell 874.8 494.2 1
4 Commerce & Finance Law Offices 533.3 301.3 4
5 Paul Hastings 474.0 267.8 3

    Source: Thomson Financial