Citic demands more from Bear Stearns

6 March 2008

Chinese bank Citic is looking to buy a larger stake in Bear Stearns after shares in the US investment bank reached a new low.

In October, a deal was made whereby Citic would buy six per cent of Bear Stearns for $1 billion, but the Chinese bank now wants more for its money after share prices fell.

Without investing any more cash, Citic is now expected to demand between eight and 9.9 per cent of the bank, according to various reports.

Foreign investors are only allowed to buy up stakes of up to 9.9 per cent without the US government intervening and investigating, but even this would make Citic Bear's largest shareholder.

Citic claims it is entitled to a larger stake because Bear Stearns' stock has dropped in value by 35 per cent since the deal was announced.

It is thought that the new deal could mean that Bear would also be entitled to more of a stake in Citic.

The original deal saw Bear Stearns assuming $1 billion of Citic' brokerage debts in return for a two per cent stake.

Now that Citic's share price has also fallen by 47 per cent since the original deal, Bear could push for as much as four per cent.

Kong Dan, Citic Group chairman said the revised deal was just about adjusting the price according to the market.

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development