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The planned initial public offering by China International Capital Corp (CICC) is set to test investors' faith in the first Sino-foreign investment bank after last year's departures of key dealmakers including chief executive Levin Zhu Yunlai, son of a former Chinese premier Zhu Rongji.
The market is keen to see whether the new management of the Beijing-based brokerage can invigorate its investment banking business after it came under attack by Chinese and Wall Street rivals at home and abroad.
CICC is planning to raise US$1 billion in a Hong Kong offering that could value the company at US$4 billion.
The decision to tap the market comes at a time when the mainland securities regulator is looking at allowing powerful lenders to enter the country's highly fragmented brokerage industry.
"CICC has been suffering from high employee turnover after losing its dominance over the lucrative IPO market," said Howhow Zhang, head of research at Shanghai-based consultancy Z-Ben Advisors.
Chairman Jin Liqu resigned from the top position in October, after less than a year at the helm, a day after Levin Zhu quit.
Besides Jin and Zhu, CICC last year lost Jiang Guorong, co-head of investment banking, and Marshall Nicholson, co-head of international investment banking.
Central Huijin Investment, the state investment firm that controls China's biggest banks, is the biggest shareholder in CICC, with a 43 per cent stake. Private equity firms TPG and KKR own a 10.3 and a 10 per cent stake, respectively, according to its 2013 annual report.
If the flotation succeeds, it will provide an opportunity for private equity investors to cash in their long-held positions.
Morgan Stanley sold its 34.3 per cent stake in CICC to investors including TPG, KKR and Singapore's GIC after a 15-year involvement with the company, over what was described as a culture and leadership clash.
Known for its relationship with China's giant state-owned enterprises, CICC enjoyed a smooth ride for more than 10 years after it was set up in 1995 by Morgan Stanley and China Construction Bank. It hosted a number of big-ticket listings of Chinese state-owned banks and telecommunications firms, including Agricultural Bank of China, which raised US$22 billion in 2010 from a dual listing in Hong Kong and Shanghai.
But for years CICC has underperformed, in part because it was not that good at building relationships with non-state-owned enterprises that have become increasingly more important.
"Not covering private companies was a mixed problem of arrogance and ego. Also the top management thought Chinese state-run firms are more reliable," said a former staff member of CICC who did not want to be identified.
CICC ignored Chinese private companies as they usually raise less than their state counterparts. Alibaba's New York listing, however, changed all that, as the world's biggest IPO reflected a seismic change in China's economic structure and appetite for rapidly growing innovative companies over bricks-and-mortar ones.
CICC's hesitation to develop industry groups that provides in-depth industry knowledge and transaction expertise has limited its growth into other areas, including asset management and margin financing, a popular and lucrative business in China.
Beyond capital raising, powerful Western lenders have established advanced platforms in different asset classes like bonds. currencies, and financial derivates as well as advising on cross-broader mergers and acquisitions.
"CICC is not changing strategically as a result of Zhu's departure," said Zhang of Z-Ben Advisors.
CICC hired its former investment banking head Bi Mingjian as chief executive, in the hope of leveraging his strong deal making experience to lead the company's maiden share sale.
Bi was involved in large listings of state-owned enterprises, including China Mobile's landmark US$4.2 billion IPO in 1997.
"Bi's years outside CICC are a plus. He can bring an outsider's perspective to the company," said a banker who has worked with him, referring to his private equity experience with Hopu Investments after leaving CICC in late 2005.


CICC share sale to test investor faith after executive exodus

CICC plans to raise US$1 billion in a Hong Kong float. Photo: Bloomberg

New CICC chief faces challenges in returning investment bank to glory days

CICC was set up in July 1995 to help mainland and Sino-foreign firms raise funds in international capital markets. Bi Mingjian (inset) is appointed as the firm’s chairman and chief executive followed the departure of several top executives in the past year.  Photo: Bloomberg

CICC was set up in July 1995 to help mainland and Sino-foreign firms raise funds in international capital markets. Photo: Bloomberg

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