China Construction Bank Corp., one of the country's largest state banks, denied a newspaper report on Monday that it is in early talks with Bear Stearns Cos. that could lead to it taking a minority stake in the Wall Street investment bank.
A spokeswoman for Bear Stearns said the firm does not comment about market rumors, but the investment bank's shares rose nearly 2 percent in early trading after the report.
An official at the news department of China Construction Bank said the bank did not have any plan to buy a stake in the U.S. securities firm, contradicting a report by the Wall Street Journal.
We have discussed with relevant departments at the bank and what we have learned is that the bank does not have such a plan, the official said by telephone.
Analysts at Fox-Pitt, Kelton met with Bear Stearns' management last week, and said in a report on Monday morning that they believe any talks Bear is having with China Construction Bank may be too casual to be taken seriously.
Bear Stearns is occasionally named as a takeover target because it is smaller than its main Wall Street rivals Morgan Stanley, Lehman Brothers, and Goldman Sachs but it is unusual to see reports of a state-controlled Chinese bank buying such an important foothold on Wall Street.
The Wall Street Journal cited people familiar with the matter saying the plan calls for CCB, China's third-largest bank in terms of assets, to invest $2 billion to $4 billion in convertible bonds issued by Bear Stearns.
The bonds could eventually be converted into shares, giving the Chinese bank a 10 percent to 20 percent stake in Bear Stearns, making CCB the securities firm's largest shareholder, the report said.
The deal's reliance on bonds, rather than a direct equity investment, would allow the Chinese bank to sidestep a difficult investment approval process in China, the Journal said.
China Construction Bank Corp. raised $9.2 billion in a record Chinese initial public offering last year.
Bear Stearns shares rose $2.69 to $143.96 in early trading on the New York Stock Exchange. The investment bank's shares have risen about 50 percent in the past year, lagging the Amex Securities Broker Dealer Index's increase of nearly 70 percent.