CITIC says in talks to revise Bear Stearns deal
BEIJING (Reuters) - CITIC Securities (600030.SS), China's top brokerage by assets, is negotiating a bigger stake in Bear Stearns Cos BSC.N to reflect the U.S. investment bank's tumbling stock price since the two parties agreed to swap stakes last October, a CITIC executive said Wednesday.
Kong Dan, chairman of CITIC Securities parent CITIC Group, told reporters that talks would push ahead quickly but gave no further details. Bear officials did not return calls seeking comment.
Kong's comments were the first confirmation by CITIC of news reports last month that it was seeking to reopen the terms of the deal to reflect market price changes. A revised deal would likely make CITIC the largest single shareholder of the No. 5 U.S. investment bank,
The New York-based bank has been battered by slumping U.S. mortgage markets, sinking prices for corporate debt and a slowdown in investment banking. While all Wall Street banks have been punished, Bear, with its reliance on mortgage and debt trading, is seen as especially vulnerable.
CITIC Securities is expected to seek a 9.9 percent stake in Bear Stearns, the maximum allowed to foreign parties without triggering a process of intense U.S. government scrutiny, for $1 billion.
In October CITIC agreed to invest the same amount for a 6 percent stake. Bear in turn was to buy $1 billion of CITIC Securities debt, convertible to a 2 percent stake.
Based on Bear's 118.1 million outstanding shares at the end of November, CITIC would pay roughly $85 a share for the larger stake. That is down 35 percent from about $130 per share under the original deal.
Shares of Bear Stearns were up $1.11, or 1.4 percent, to $78.28 in morning trade on the New York Stock Exchange. The shares have plunged 33 percent since the swap was announced October 22.
Shanghai-traded shares of CITIC have fallen even harder -- down 42 percent -- over the same period.
Yet Bear is under more pressure to get a deal done. It joins New York rivals such as Merrill Lynch MER.N, Morgan Stanley (MS.N) and Citigroup Inc (C.N) that have tapped foreign investors for billions of dollars of new capital to help work through their losses.
Bear also is eager to plant its flag in China, a large and fast growing market, to help the bank boost earnings and reduce its dependence on U.S. markets.
(Reporting by Pily Zou in Beijing; Additional reporting by Joseph A. Giannone in New York; Writing by Alan Wheatley; Editing by Edmund Klamann and John Wallace)
