BofA Increases China Stake
Bank of America
(BAC) - Get Report
is exercising an option to purchase additional shares of
China Construction Bank
.
The Charlotte, N.C.-based banking titan said on Tuesday that it plans to purchase 6 billion H-shares next week valued at $2.42 Hong Kong dollars a share (31 cents a share in U.S. dollars), according to BofA's original investment agreement to purchase shares of China Construction in 2005.
China Construction Bank is currently majority-owned by the Chinese government's China SAFE Investments. BofA purchased its original stake for $3 billion from the government entity in 2005.
After the $1.86 billion purchase, BofA will hold approximately 25.1 billion H-shares, or 10.75% of China Construction's issued shares, up from the 8.2% stake it currently has, the bank said.
BofA cannot sell the 6 billion shares until Aug. 29, 2011 without the consent of China Construction Bank. The bank has the option of purchasing up to 19.9% of the shares through 2010.
BofA's added investment in China comes as a number of banks compete to gain a foothold in the region. In many of the recently formed partnerships, however, the money was coming the other way, as cash-strapped banks sought new sources of capital.
Prior to selling itself to
JPMorgan Chase
(JPM) - Get Report
in March,
Bear Stearns
(BSC)
received a $1 billion investment from Citic Securities. China Development Bank pumped $5 billion into
Morgan Stanley
(MS) - Get Report
.
Shares of BofA were rising in morning trading.