Agricultural Bank of China Ltd (ASX: ABC) announced on September 6 that its board of directors has approved a plan to issue A-shares to specific investors, aiming to raise up to 160 billion yuan. The funds will be used entirely to replenish the bank's core Tier 1 capital. The issuance is designed to introduce China Tobacco and its subsidiaries as strategic investors, with a conditional share subscription agreement already signed.
The Ministry of Finance will subscribe to 130 billion yuan of the new shares, while China Tobacco will contribute 100 billion yuan. Several provincial tobacco companies are also participating: Jiangsu Tobacco, Zhejiang Tobacco, and Hubei Tobacco each subscribing 50 billion yuan, Beijing Tobacco subscribing 30 billion yuan, and Shuangwei Investment subscribing 20 billion yuan. After deducting issuance-related expenses, all proceeds from the offering will go toward strengthening the bank's capital base.
Where the capital injection stands
The issuance involves domestic RMB ordinary shares (A-shares) with a par value of 1.00 yuan per share. The offering will be conducted as a private placement to specific investors, with the timing determined after approval from the Shanghai Stock Exchange and registration with the China Securities Regulatory Commission. The bank will execute the issuance within the validity period of the regulatory approvals.
Subscription details and pricing mechanism
The subscribers include the Ministry of Finance, China Tobacco, and its provincial affiliates: Jiangsu Tobacco, Zhejiang Tobacco, Hubei Tobacco, Beijing Tobacco, and China Shuangwei Investment Co., Ltd. The pricing benchmark date is set as the first day of the issuance period, with the offer price not lower than the average trading price of the bank's A-shares over the 20 trading days preceding the benchmark date, rounded to two decimal places. If price adjustments occur due to ex-dividend or ex-rights events during that period, the calculation will factor in the adjusted prices.
The final offer price will be determined by the board of directors or authorized persons, based on shareholder authorization, in consultation with the sponsor and lead underwriter, following regulatory guidelines and market conditions. Any policy adjustments by regulators regarding pricing methods will lead to corresponding changes in the issue price.
Share count and lock-up period
The number of A-shares to be issued will be calculated by dividing the total fundraising amount by the issue price, capped at 15% of the bank's share capital prior to the issuance. Any fractional shares will be rounded down, with the corresponding amount credited to the bank's capital reserve. The final share count will be confirmed post-registration, in coordination with the sponsor, and may be adjusted based on regulatory policy changes.
All subscribed shares are subject to a five-year lock-up period commencing from the date the shares are registered with the Shanghai branch of China Securities Depository and Clearing Corporation. Shares derived from bonus issuances or capital reserve conversion during this period will also comply with the lock-up restrictions. After the lock-up expires, share transfers will adhere to the Company Law, Securities Law, and regulations set by the financial regulatory authorities, the CSRC, and the exchange.