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Slim pickings: Ant to pay bankers up to $198 mln in fees for Hong Kong IPO

Scott Murdoch
·3 min read

By Scott Murdoch

HONG KONG, Oct 26 (Reuters) - China's Ant Group will pay bankers selling its shares in Hong Kong up to $198 million in underwriting fees, its filings showed on Monday, in line with a trend of large issuers sharing a small portion of their fundraising with advisers.

The financial technology giant on Monday set terms for its dual-listing in Hong Kong and Shanghai aimed at raising up to $34.4 billion in the world's largest market debut.

It is looking to raise $17.24 billion in the Hong Kong tranche of the initial public offering (IPO), which would be the largest flotation in the Asian financial hub since insurance major AIA's $20.5 billion offering in 2010.

The documents lodged with the Hong Kong exchange showed the 24-strong underwriting syndicate will earn 1% of Ant's IPO proceeds.

In Hong Kong, it is standard practice for banks to be paid 2% to 2.5% of an IPO's proceeds, according to Dealogic, which ranks the city as one of the lowest fee-paying financial centres in the world. The fee paid to the banks running the Shanghai leg of Ant's listing was not immediately known.

China International Capital Corporation (CICC), Citigroup, JPMorgan and Morgan Stanley are the sponsors for the Hong Kong leg of the deal, meaning they will be paid more for their senior roles on the deal.

"It is common for very large and very high profile deals to pay lower fees. And this is as high profile as it gets in Hong Kong," Philippe Espinasse, an Asian capital markets consultant and former investment banker told Reuters.

"Banks will have bent over backwards to participate in this IPO irrespective of the lower underwriting fees."

MARQUEE DEALS

Besides the remuneration for their work as underwriters, investment banks also covet league table credit such marquee deals bring as they bolster their marketing efforts for other large issuances.

Fees earned by each of the banks were not listed in the updated prospectus but it is industry practice that co-sponsors are paid the most and the remaining banks' fees are dependent on the seniority of their role on the deal.

The payday for banks on Ant's Hong Kong flotation is, however, slightly better than the company it is about to dethrone as the world's largest IPO to date.

Saudi Aramco paid its 25-strong banking syndicate just $60 million after it raised $29.4 billion, Reuters reported in January, with the top three banks earning half of the fees. .

The 2014 IPO in New York of Ant's parent Alibaba, which raised $25 billion, earned banks $300 million, Dealogic data showed. For a FACTBOX on how Ant's fee compares with other major global deals, see

Hong Kong's record pay day for banks was Agricultural Bank of China's $22.1 billion IPO in July 2010 which earned its 10 banks $412 million.

($1 = 7.7500 Hong Kong dollars)

(Reporting by Scott Murdoch in Hong Kong; Editing by Sumeet Chatterjee and Emelia Sithole-Matarise)