China International Capital Corporation, Morgan Stanley Dean Witter

For Asia's equity markets, the year 2000 belongs to the Chinese privatization programme, with three equally landmark deals - Petrochina, Unicom and Sinopec - competing for one award. As the largest of the three and the one that fully encapsulated renewed momentum towards the Mainland's growth story, Unicom wins by a nose. The deal also stands clear because of the flawless execution that helped it enjoy an easier and more successful passage through the primary markets than its most immediate predecessor Petrochina, which became a flashpoint for WTO negotiations.

To lead manager Morgan Stanley's credit, this smooth ride was by no means certain when the deal was finally launched in late May. It had already been postponed once the previous year because of the fallout from having to unwind its foreign joint ventures. In the immediate run up to roadshows, the company had also been plagued by a series of negative articles concerning: regulatory favouritism towards China Mobile; internal management squabbles and; contradictory signals about which technology the company would be using for its 2G and 3G networks.

The general market backdrop was also far from ideal, with a number of global deals such as Vodafone Pacific being pulled. The bank, however, remained convinced that as long as it could change investors' perception of the company, overall market conditions would remain of secondary importance.

Following a similar strategy to one used for China Mobile at IPO in 1997, it was decided to go out with a relatively wide and conservative price range that could be revised upwards subject to the generation of sufficient momentum and hence demand. "We wanted to eliminate any possibility of execution risk," said Asian ECM head Colin Stewart at the time. "We wanted investors to feel comfortable that here was a deal that was definitely going to get done no matter what."

With market conditions starting to move in the company's favour and China Mobile's share price rising 26% during the course of roadshows, the approach paid off and the indicative range was pushed up. Unlike either Petrochina or Sinopec, which relied heavily on the world's oil super majors to fill their books, Unicom had just one strategic investor, Hutchison Whampoa, which took up $400 million.

Large buying, particularly by index funds, ensured that institutional books closed four times oversubscribed and the deal was subsequently priced just below the top end of its revised range in order to give secondary trading an initial lift.

The largest IPO in Chinese history, Unicom also represented the largest domestic IPO in Hong Kong since retail and institutional offerings were split apart in 1993 and at the time, Asia's largest equity offering outside Japan. As Stewart concluded, "China Unicom is a hallmark example of what a government should do. How an attractive growth story and impressive management can win the day."

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