BofA Increases China Stake

The Charlotte, N.C.-based bank picked up 6 million shares and now holds a 10.75% stake in China Construction Bank.
By Laurie Kulikowski ,

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.

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