Alibaba to pay banks up to $32.3 million in fees for Hong Kong listing

China’s Alibaba will pay its investment banking syndicate up to $32.3 million for leading its Hong Kong listing which will raise up to $12.9 billion, according to documents filed with U.S. securities regulators. The e-commerce giant employed two co-sponsors, China International Capital Corp (CICC) and Credit Suisse, to head the deal which has been carried out over the past week.

The two lead banks were joined by Citigroup Inc, JP Morgan and Morgan Stanley as joint global co-ordinators while HSBC and Industrial and Commercial Bank of China (ICBC) were appointed as junior book runners. An additional supplementary prospectus lodged with the Securities and Exchange Commission (SEC) showed Alibaba would pay investment banking fees of $28.1 million for the sale of 500 million shares.

This would rise to $32.3 million if a so-called overallotment of an additional 75 million shares is issued, which bankers think will occur. The fee split between the banks was not listed in the SEC documents but it is accepted industry practice that co-sponsors are paid the most and the remaining banks’ fees are dependent on the amount of shares sold.

According to the filings, Citigroup was allotted more shares to sell than JPMorgan and Morgan Stanley as bookrunners. A Hong Kong brokerage part-owned by Alibaba founder, Yunfeng Securities, was also listed as being a participant in the deal. The investment banks will also benefit from the 1 per cent brokerage fee paid by investors buying stock in the secondary listing. Alibaba’s payment to banks sits well below the $90m cheque that Saudi Arabia’s Aramco intends to write for the banks working on its slimmed down initial public offering (IPO).

The highest ever fee payment on a deal was Visa’s 2008 IPO in New York which raised $19.6 billion and led to the company paying its banks $550.2 million, according to Dealogic data, Alibaba’s Hong Kong stock is due to start trading next Tuesday.

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