rose Monday after the struggling investment bank reached a cross-shareholding deal with China's Citic Securities.
The firms will each spend around $1 billion to buy each other's shares. The strategic alliance will cover a "broad collaboration" in China and a joint venture in Hong Kong that will "offer a broad range of capital markets services on a pan-Asian basis."
Citic will buy $1 billion worth of Bear's 40-year trust preferred stock at a conversion price based on Bear's trading prices last week. The deal will give Citic a 6% stake in Bear and Citic can take a stake as large as 9.9%. Each company will have representation on the other's board.
"This groundbreaking alliance will give Bear Stearns a unique footprint in one of the world's fastest-growing economies through a strategic partnership with a premier market leader," said CEO James Cayne. "We are confident that combining our operations in Asia with Citic Securities will greatly benefit Bear Stearns' global client base and generate substantial new revenues and growth opportunities for the firm over the long term. Looking forward, partnering with Citic Securities in the dynamic Asian market will also create enhanced opportunities for our employees."
The announcement comes after a tumultuous summer that saw Bear Stearns shares plunge 40% from their highs after two of its hedge funds collapsed under the weight of bad bets on the subprime mortgage debacle. The setback fed fears of a liquidity crisis at Bear and led to rumors that the company might score an investment from Warren Buffett's
, among others.
Bear rose 59 cents to $117.