Bear Stearns may offer stakes to Buffet, banks: report
By Our Corporate Bureau | 27 Sep 2007
Mumbai: Bear Stearns Cos., the fifth-biggest US securities firm, is close to selling a stake to US billionaire Warren Buffett or a financial institution as it struggles to revive earnings and stock price.
Buffett, chairman of Berkshire Hathaway Inc., is in contact with Bear Stearns chief executive James Cayne, the New York Times reported in its online edition, citing unidentified sources. The report said potential investors also include Bank of America Corp., Wachovia Corp., and two Chinese companies, Citigroup and China Construction Bank Corp.
New York-based Bear Stearns, which trails rivals including Goldman Sachs Group Inc. and Morgan Stanley, hopes to become more competitive in international markets by partnering with a larger US or Chinese banks. Bear Stearns, however, needs cash after mortgage-related losses led to its biggest drop in quarterly earnings in more than a decade.
Meanwhile, Joseph Lewis, the British-born, Bahamas-based currency trader, has bought a 7 per cent stake in Bear Sterns for $860 million before the company reported a 61 per cent decline in third-quarter earnings.
Buffett contacted the Bear Stern CEO last month when the stock approached $100, the Times reported, adding that Bear Stearns executives are no longer insisting that a buyer pay a 40 per cent premium for a stake in the company.
Buffett bought 12 per cent of New York-based Salomon Brothers in 1987 to protect the securities firm against a takeover by corporate raider Ronald O. Perelman. Salomon was sold in 1997 to Citigroup Inc., the biggest US bank.
Credit-default swaps on Bear Stearns fell 15 basis points yesterday to 75 basis points, according to Phoenix Partners Group in New York, signaling an improving perception of credit quality. The five-year contracts dropped to 70 basis points earlier in the day, the lowest in two months.
