China CITIC Securities announced on Friday that it has reached a preliminary strategic collaboration agreement with US investment bank Bear Stearns.
China's largest listed securities company said the collaboration involved a cross investment of one billion US dollars each to pool their business in Asia and a joint venture in Hong Kong.
Under the program, CITIC Securities will buy the equivalent of a six percent stake in Bear Stearns. It plans to increase the holdings to 9.9 percent when conditions are ready.
Bear Stearns' one billion US dollars worth of CITIC Securities' equities will be converted into a two percent stake in the Shanghai-listed security company. Bear Stearns will also be given the option to buy an additional five percent of the company, exercisable over the course of five years.
The two sides will share management expertise and technologies to provide new products and services. The CITIC Securities board has entrusted company executives to map out a detailed cooperation scheme.
Each will integrate their Asian business and establish a joint venture in Hong Kong to offer a large range of financial services. Each side will hold a 50 percent stake in the new venture.
CITIC Securities was among the first batch of Chinese securities companies to receive approval as a Qualified Domestic Institutional Investor (QDII) last month. The Bear Stearns partnership can facilitate its international strategy.
CITIC Securities said the collaboration should be approved by its shareholders and the two countries' relevant authorities.
The Chinese brokerage reported a net profit of 4.16 billion yuan in the third quarter, up 558.22 percent compared with the same period last year, boosted by the country's bullish stock market.
Traumatized from this summer's US sub-prime mortgage crisis, Bear Stearns' Chinese strategy provides a growing business opportunity. Earlier this week, the New York-based company announced it would cut a further 300 jobs to reduce costs.
An official from the General Manager's Office of CITIC Securities told Xinhua on condition of anonymity that the Bear Stearns partnership was one step forward for the Chinese brokerage's global strategy.
"As the country's economy and various industries are developing fast under globalization, Chinese financial companies should keep pace," the official said.
Shares of CITIC Securities were suspended from trading starting from October 20 when it entered into talks with Bear Stearns. Its shares closed at 105.93 yuan on the previous trading day.
It resumed trading on Friday morning and rose to 116.49 yuan when the morning session closed, a 9.97 percent increase.
(Xinhua News Agency November 2, 2007)
