Bear Stearns Cos, an investment bank battered by the mortgage market slump, and China's CITIC Securities Co said on Monday they will take investment stakes in each other and form a broad strategic alliance.

CITIC will invest $1 billion in Bear Stearns and receive 40-year trust securities that would convert into about 6 percent of the equity in the New York-based bank.

Bear Stearns plans to buy $1 billion of CITIC debt that would over time amount to a 2 percent stake in the Beijing-based firm.

(Reporting by Joseph A. Giannone)