ACGBF Agricultural Bank of China (PK)

China International Capital Corp. has raised nearly 60% of its planned US$800 million initial public offering in Hong Kong from cornerstone investors, according to people with knowledge of the matter, locking in a big chunk of the deal at a time of volatile markets.

CICC, China's largest foreign-backed investment bank and the earliest to gain foreign backing, is partly owned by KKR & Co. It made its name taking many state-owned firms public in the early 2000s and is planning to list in Hong Kong on Nov. 9.

It set a price range of 9.12 Hong Kong dollars (US$1.19) to HK$10.28 a share for its IPO, for which it has received US$465 million from at least nine cornerstone investors. Most of those are state-owned giants. The biggest investor among them is the country's US$40 billion Silk Road Fund, set up in November 2014 to finance China's "one belt, one road" development plan, a government-backed project to lay networks of infrastructure to better connect the country to the rest of Asia, Africa, the Middle East and Europe.

Baosteel Group, China Mobile, CGN Power and CSR Corp. have also committed funds to the IPO as cornerstone investors.

Cornerstone investors in Hong Kong commit funds toward an IPO and agree to buy at the float price, but are tied to holding the stock for a certain period, usually six months, after the shares start trading. The participation of cornerstone investors can help give other investors confidence to invest in an IPO.

The funds committed to the Chinese investment bank are the second-highest ever for a Hong Kong IPO, and comes just days after the No. 1 cornerstone deal, that of debt-clearing agency China Huarong Asset Management Co., locked in commitments from investors. Huarong sold a record 70% of its US$2.3 billion Hong IPO to 10 cornerstone investors.

The "bad bank" sold 5.77 billion shares at HK$3.09 each on Friday, near the low end of a HK$3.03 to HK$3.39 price range, according to people with knowledge of the deal.

CICC's and Huarong's IPOs show how important cornerstone investors are amid this year's choppy markets. The benchmark Hang Seng Index, while just down around 3% this year, is 21% off its April peak, while the Shanghai Composite Index is 35% below its level then. China's stock markets were on a tear until June.

CICC's price range of HK$9.12 to HK$10.28 translates into 1.2 to 1.3 times book value, the people with knowledge said, which puts it at a discount to rivals, including the country's biggest investment bank and brokerage, Citic Securities Co., which is trading at 2.6 times price-to-book.

The Chinese investment bank had earlier cut its size from US$1 billion and will start taking orders on Oct. 27.

The planned listing of CICC will give its shareholders, including private-equity firms KKR & Co. and TPG Capital, the chance to exit their investments despite the turmoil in Chinese stocks.

Central Huijin Investment Ltd., the domestic investment arm of China's sovereign-wealth fund, is the largest shareholder in CICC with a 43.35% stake. Singapore's sovereign-wealth fund GIC Pte. Ltd. holds 16.35%, while TPG Capital owns 10.3% and KKR 10%, according to its annual report.

CICC was formed in 1995 by Morgan Stanley and China Construction Bank Corp. as China's first Sino-foreign joint-venture investment bank. Morgan Stanley sold its stake in December 2010 to a consortium that included KKR, TPG, GIC and Great Eastern Holdings Ltd., the insurer controlled by Singapore's Oversea-Chinese Banking Corp. It has offices in Hong Kong, New York, London and Singapore.

CICC is a sponsor, or the bank responsible for the IPO, on its own float, as is ABC International, the investment-banking unit of the Agricultural Bank of China Ltd., one of the country's top four banks.

Write to Kane Wu at kane.wu@wsj.com

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(END) Dow Jones Newswires

October 23, 2015 07:55 ET (11:55 GMT)

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