Bear Stearns, China''s CITIC Securities to form alliance
22 October 2007Mumbai: US investment bank Bear Stearns Cos, hit by a mortgage market slump, will swap stakes with China''s CITIC Securities Co and form a broad alliance, the two firms said in a joint statement.
Under the tentative deal, CITIC would invest about $1 billion in Bear Stearns securities that would be converted to about 6 per cent of the New York-based investment bank. Bear Stearns in turn would buy $1 billion of CITIC debt that would converted to a 2 per cent stake in the Beijing-based firm over a period.
Neither company can hold more than 9.9 per cent of the other''s stock. The deal is subject to a definitive agreement. While the two companies have agreed to negotiate with each other, they also said there was no assurance a deal.
A deal would prop up Bear Stearns and increase access to business in booming Asia, it would provide a good opportunity for CITIC to expand overseas and learn from global players.
A deal needs the approval of China''s State Council as well as securities regulators and shareholders.
CITIC Securities, the largest brokerage in China and Asia''s biggest by market value, hopes to extend its financial services business.
The companies, in a statement, said the alliance would include broad collaboration in China and the development of new securities for the rapidly growing Chinese market.
Bear and CITIC will form a new Hong Kong-based capital markets joint venture doing business across Asia. Bear will contribute its Asia operations to the 50:50 venture.