China’s biggest IPO in years poses $9bn question for Goldman Sachs and rivals

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Goldman Sachs, JPMorgan and other western banks have spent months lobbying to work on one of China’s biggest-ever stock market listings.

The planned $9bn Shanghai listing of Swiss agricultural chemicals company Syngenta appears to be a dream ticket for the banks: a large international company that has existing relationships with global institutions.

But as rising geopolitical tension unravels the commercial ties between the US and China, the banks may not even be able to participate, reflecting the rapidly changing business landscape in the world’s second-largest economy.

“We do want to be a part” of the initial public offering, said one Asia-based banker at a global firm. But “we always have the question mark — are we able to eventually work on this or not?”

Syngenta’s owner for the past six years, state-owned ChemChina, is on a US government watchlist of companies with close ties to China’s military. Global banks are asking lawyers and political consultants if they can or should be part of the listing, yet most have no clear answer.

The Syngenta listing “is the embodiment of how difficult it is from a financial services standpoint to succeed in China”, said Han Lin, China country head at advisory firm The Asia Group.

“If you can’t even do [the IPO of] an established international firm with a long history, what hope is there of participating in local deals?”

This year, foreign banks have been involved in just $297mn worth of new listings in China, or 1.2 per cent of the total — putting them on track for the smallest share of the annual total since they began operating in the country’s securities sector in 2009, according to data from Dealogic.

The freeze-out has been especially harsh for US banks, which have failed to nab spots on a single mainland Chinese IPO in 2023, despite a total of $26bn being raised this year.

If successful, the Syngenta public offering will be the fourth-biggest listing in mainland China.

It has taken years to materialise. ChemChina, which pulled off the largest-ever outbound takeover by a Chinese company when it purchased Syngenta in 2017, tried to list it earlier but was delayed by the pandemic.

This year, Syngenta dropped plans to list on Shanghai’s tech-focused Star board after the exchange rejected it without explanation.

The company finally got the green light from a Shanghai Stock Exchange listing committee this month to list 20 per cent of the company on the exchange’s main board. If Syngenta achieves its goal of raising Rmb65bn ($9.1bn), it would rank as one of the largest listings in China’s history, according to Dealogic data.

Bankers at Goldman Sachs, JPMorgan, Morgan Stanley, UBS and HSBC — all of which have mainland investment banking businesses — have been lobbying for roles on the listing, for which a roadshow could begin within weeks, multiple people with knowledge of the process said.

“Even given the US-China relationship, we continue to stick to our strategy” of bringing international investors to China, an executive at one of the banks said.

Western banks are particularly drawn to the listing because it would position them well to win more business if the company carried out a secondary listing in London, Zurich or New York — an option that people close to the company have said is still on the table.

The global banks’ main selling point is their ability to bring in international investors, such as hedge funds and sovereign wealth funds. “It’s a Swiss company,” a banker with knowledge of the process said. “If you’re a Chinese investor, you’d want to see foreigners investing. It would give you more comfort.”

As recently as October, banks including Citi, Morgan Stanley, JPMorgan and HSBC advised the Swiss firm on a $500mn bond issuance in Hong Kong.

However, the Syngenta IPO prospectus is available only in Mandarin, and no western banks have been publicly appointed even to junior roles. Syngenta and the banks declined to comment.

In 2021, when Covid-19 restrictions prevented senior western bankers from travelling to the mainland to make pitches in person, Syngenta appointed China International Capital Corporation, Bank of China International and CITIC Securities as the main underwriters and lead distributors.

One issue for western banks is over potential complications from widening US sanctions.

ChemChina is on a US Office of Foreign Assets Control list, introduced during Donald Trump’s presidency and amended under the Biden administration, which prevents US investors from purchasing or selling public securities in listed companies that Washington says are part of a Chinese military-industrial complex.

Syngenta is not itself on the list, and as a separate entity it is not covered by the restrictions on ChemChina, meaning banks are not legally prevented from advising it, said Benjamin Kostrzewa, former assistant general counsel at the Office of the US Trade Representative and a lawyer at Hogan Lovells in Hong Kong.

“But it could create some scrutiny from policymakers in Washington who are anxious to prevent US companies from supporting companies associated with the Chinese military.”

It’s not clear whether western banks — especially US ones — will be able to get far enough into the process to have to worry about such questions.

Executives from two US firms said they would make final decisions about whether they can act on the deal if they actually win mandates from the company to do so.

In the meantime, their Asia-based bankers are stuck in limbo. “Do we pitch it 100 per cent all in, or to 80 per cent of [our ability]?” one of the bankers said. “You probably wouldn’t be all in.”

Additional reporting by Arjun Neil Alim in London