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Monday, 23 October 2017

UPDATE 2: JP Morgan drops another China IPO amid 'princeling' probe - sources

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(IFR/Reuters) - JP Morgan Chase & Co has stopped working on a Chinese firm’s initial public offering amid an investigation by US authorities into its hiring practises in China, people with direct knowledge of the matter told Reuters on Tuesday.

(Updates from IFR’s earlier story with UBS mandated on IPO, Morgan Stanley investment in Tianhe.) 

It is the second time JP Morgan has stepped aside from a Chinese IPO candidate while U.S. securities regulators look into whether the bank violated federal laws in hiring the relatives of current or potential clients with the sole purpose of winning business from them.

JP Morgan has ended its IPO discussions with Tianhe Chemicals, the people said, as the supplier of lubricating oil additives to refiners such as China Petroleum and PetroChina was trying to move ahead with an around US$1bn deal.

Thomson Reuters publication IFR said on Monday that Tianhe Chemicals hoped to launch the IPO in the second quarter of this year.

JP Morgan’s exit was driven by concerns raised about the bank’s employment of Joyce Wei, the daughter of Tianhe Chemicals Chairman Qi Wei, IFR reported, citing sources.

Hong Kong securities license filings show that a Jiao Wei worked at JPMorgan from January 2012 to August 2013, and is now on the staff at UBS, joining the Swiss bank in October. Jiao is Joyce Wei’s Chinese name, a person familiar with the matter told IFR, affirming also that she is Wei’s daughter. Another source said UBS is mandated to work on the Tianhe Chemicals IPO.

JP Morgan and UBS declined to comment. Efforts to reach Joyce Wei and Tianhe Chemicals were not successful.

JP Morgan had been discussing an overseas listing with privately-owned Tianhe since at least 2011, when IFR first reported the company planned to list in London. It is not clear whether Tianhe signed any formal letter of engagement before or after Wei joined JP Morgan. One source said on Tuesday the company – in which Morgan Stanley’s MS.N Asia private equity unit invested US$300m for a minority stake in 2012 – planned to list in Hong Kong.

The US Securities and Exchange Commission and the Department of Justice are investigating whether JP Morgan violated bribery laws by improperly hiring the relatives of well-connected Chinese officials. The investigation is ongoing and the bank has not been accused of any wrongdoing related to the case.

JP Morgan earlier withdrew from a syndicate of underwriters working on a US$3bn listing by China Everbright Bank Co, Reuters reported in November.

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