By Xinhua
Beijing : US investment bank Bear Sterns and China’s largest securities firm CITIC Securities are to revise a share swap agreement, increasing the stake in each other, sources close to the deal said Thursday.
Ongoing talks are now focused on lowering convertible prices of each share without changing the fixed-investment scale. Each side is set to cut the price by the same extent, the source said.
After the price cut, CITIC would hold 9.9 percent stake of the US bank, up from the previous six percent. As for Bear Sterns, the $1-billion debt would convert to a 2.5 percent stake in the Shanghai-listed firm that would amount to 7.5 percent over time.
No information about the actual convertible prices or the extent of the price cut was available yet.
The revised plan is still under discussion and subject to regulatory approval. “If everything goes well, the plan will be made public in April after adjustment,” the Business Finance Review, a Beijing-based magazine, cited the source as saying.
The adjustment came amid a share price slump for both sides after the agreement was sealed in October.
Bear Sterns, hit particularly hard by the worsening US subprime mortgage crisis, has seen its shares drop to less than $80 from $120 in October. Meanwhile, CITIC’s stock is down nearly 36.4 percent.
Bear Sterns and CITIC Securities agreed in October to a cross-investment plan. Under the agreement, CITIC will invest $1 billion for about six percent of Bear Sterns, while the US bank is buying $1 billion of CITIC Securities debt, which will amount to two percent stake.
The two sides plan to share management expertise and technologies to provide new products and services to get a bigger share of China’s booming financial market.
They are also considering setting up a joint venture in Hong Kong to offer a large range of financial services across Asia.