Investment Banking Merrill Lynch ICBC in IPO

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Investment BankingMerrill LynchICBC in IPO
Financial Institution in HK ECON 310 s4g4
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Introduction to investment Bank

• Best known in the world
• Help companies to raise money in primary market
• Intermediaries
• Differ from commercial bank brokerages
• Commerical Bank Take deposits and make
  commercial and retail loans
• BrokeragesAssist in the purchase and sale of
  stocks, bonds, and mutual funds

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Background of Merrill Lynch

• Established in 1914
• Owner Charles E. Merrill Edmund C. Lynch
• Place Wall street in New York City
• In 1959 become 1st member firms of the New York
  Stock Exchange
• Go public in 1971

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Background of Merrill Lynch (cont)

• CEO
• President Chairman of the Board
• Industry Finance Insurance
• Main Products
• Financial Services
• Investment Banking
• Investment Management

Stan O Neal
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Responsibilities of Merrill Lynch
Year Events
1980 Started the underwriting business
2001 E. Stanley O Neal became president and COO Merrill Lynch, Citigroup and Goldman Sachs advised ATT on its IPO
2002 E. Stanley O Neal became CEO
2003 7.1 market shares of the deals E. Stanley O Neal became the first African-America chairman of Merrill
2004 Won the advisory on the sale of ATT Wireless Group
2006 Merrill Lynch, Pierce, Fenner Smith, Inc. v. Dabit, a 2006 Supreme Court case involving security fraud claims

• Underwriting
• Researching provide advice
• Pricing

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Multicultural Marketing of Merrill Lynch

• African American Marketing
• Hispanic American Marketing
• LGBT (Lesbian, Gay, Bisexual and Transgender)
  Marketing
• Native American Marketing
• South Asian Marketing
• Special Needs Marketing
• Womens Marketing

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Major Locations of Merrill Lynch

• New York City, New York, U.S., global
  headquarters
• Jacksonville, Florida, U.S., corporate center,
  supporting North America operations
• Hopewell, New Jersey U.S., corporate center,
  supporting North America operations
• Jersey City, New Jersey U.S., corporate center,
  supporting North America operations

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Major Locations of Merrill Lynch (Cont)

• Princeton, New Jersey, U.S., corporate center,
  GPC Home Office
• Singapore, corporate center, supporting Asian
  Pacific Rim (APR) operations, namely Hong Kong
  Tokyo
• London, UK, European headquarters
• Hong Kong, PRC
• Tokyo, Japan

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Financial performance
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Ranking of Merrill Lynch
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Business Groups of Merrill Lynch

• Big 3 Groups
• GMI Global Markets Investment Banking Group
• GPC
• Global Private Client
• MLIM
• Merrill Lynch Investment Managers/ BlackRock,
  Inc.

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Highlights achieved in the markets

• No. 1 trader of U.S. Stocks (NYSE) since 1989
• 2005
• No. 1 Private Banking Assets, fifth consecutive
  year,
• Leading Player
• Best Investment Bank of the Year by The Banker.
• Top European Equity House by International
  Financing Review
• Top China Equity House by International Financing
  Review Asia.
• 2006
• Best Investment Bank by Euromoney
• Barron's Best 100 Brokers
• Top Full-Service Brokerage House

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Background of ICBC

• Established in 1 Jan 1984
• One of the big four commercial bank
• Decided to restructure

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• Financial structure

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IPO Procedure

• 2005
• Financial restructure
• 2006
• 9 Mar Investment banks were chosen
• 12 Jul ICBC decided Issue A and H-share
  simultaneously
• 20 Jul Formal application
• 9 Oct International Road Show
• 16 19 Oct Subscription for the Public
• 20 Oct prices 3.07 (upper limit)
• 23 Oct Oversubscribed 76 times
• 977,000 people involved
• US543 billions was frozen
• 27 Oct made public, price _at_ 3. 60 ( ?17)

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Listing information
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Specialty of ICBC IPO

• The biggest IPO in the world

• Raise US21.9 billion
• Break the record made by
• NTT DoCoMo Inc (Japanese mobile phone company)
• Which raise 18.4 billion in 1998

SourceThe Wall Street Journal Briefing
(http//www.tdctrade.com/econforum/dj/wsj061001.ht
m)
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Specialty of ICBC IPO(cont)

• First time issue A and H-shares simultaneously
• Landmark of the stock history
• the Chief Executive
• Mayor of Shanghai
• Good example for other enterprises

• attended the ICBCs IPO ceremony in Hong Kong and
  Shanghai respectively

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Specialty of ICBC IPO(cont)

• Biggest white form eIPO application
• 10 investors using eIPO ( 83,000 people)
• Protect the environment
• Convenient to investors
• Saving the transaction fee to investors
• Receive allotment result by email

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Specialty of ICBC IPO(cont)

• The highest capital was frozen in A share
• 800 billion was frozen
• break the record of the Bank of China.

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Specialty of ICBC IPO(cont)

• Other new records
• Most retailer investors apply ( 997,000 people)
• First day ? HK37.4 billion
• No. of bank collect form ? 7 Banks, 88 branches
• Issue Warrant and Share simultaneously

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Influence in HK

• Ensure the international financial position in HK
• 2004
• world 3rd largest fund raised market
• After New York and Madrid
• 2006
• HK has good banking system listing requirement
• ICBC BoC IPO ? the largest fund raised market

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Influence in HK (cont)

• Issue H-share
• ? improve corporate governance
• ? internationalization
• Going public in HK ? Trend in the foreseeable
  future

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Comment

• Playing an important role on adjusting the
  initial price of stock
• ? advice not to issue so many warrants
• ? to stabilize the initial price
• Setting of initial price
• ? a gain for all the subscribers in the market
• ? underwriting fee 2.5 per book runner
• ? Merrill Lynch itself earned 50M

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Comment (Cont)

• Position has been raised
• Exposure of a variety of risks
• ? e.g. market risk, Liquidity Risk, Competitive
  Environment
• ? caused by the unpredictable factors
• ? Suggestion paying more attention
  identifying the risks solutions

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Conclusion

• Merrill Lynch had played an important role on the
  success of ICBC stock issuing
• ? giving contributable advice
• ? gaining satisfactory earnings growth
• ? being one of the most famous investment banks
  in the world
• ? affecting other companies ranking
• ? somehow a promotion of a stock with the
  invitation of large book runner

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tHe EnD
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• Joint Coordinator Joint Sponsors
• CICC
• ICEA
• Merrill Lynch
• Joint Bookrunners
• Merrill Lynch
• CICC
• Credit Suisse
• Deutsche Bank
• ICEA

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