NEW YORK (Reuters) - Bear Stearns Cos shares soared 7.7 percent on Wednesday on a report that several investors, including Warren Buffett, may buy part of the Wall Street investment bank.
The New York Times, citing unnamed people briefed on the discussions, said Bear Stearns is in serious talks to sell up to a 20 percent stake.
Other investors that expressed interest include Bank of America Corp, Wachovia Corp and two Chinese banks: China CITIC Bank Corp Ltd and China Construction Bank Corp, the newspaper said, citing the people.
Bear Stearns shares closed up $8.76 at $123 on the New York Stock Exchange. They remain down 24.4 percent this year.
"When you have a sophisticated investor and the second wealthiest person in the universe interested in Bear Stearns, then this may be signaling that the company may be about to turn the corner," said Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey, referring to Buffett.
Bear Stearns spokesman Russell Sherman was not immediately available for comment. Bank of America spokesman Scott Silvestri and Wachovia spokeswoman Christy Phillips-Brown said their respective banks do not discuss market speculation.
Buffett was not immediately available to comment, his assistant Jackie Wilson said.
"If it's Buffett, it would be a classic example of him exploiting other people's folly," said Chuck Carnevale, chief investment officer at Great Companies LLC in Tampa, Florida, which invests $400 million. "If markets eventually correct themselves, the subprime disaster goes away and Bear is still standing, there's an enormous amount of potential upside."
An outside investment would bolster Bear and its embattled chief executive, James Cayne.
The company has this summer faced the collapse of two hedge funds, asset write-downs and poor trading results, amid declines in subprime and other mortgages. Third-quarter profit slid 61 percent, although Bear said it believed the worst was over. The shares trade at about 1.3 times book value.
"I'm not certain why Bear would want to sell a piece of itself at an impaired value," said Brad Hintz, an analyst at Sanford C. Bernstein & Co.
"This management team has gone its own way for too many years to suddenly decide it wants to sell out at a low valuation. It's a fine franchise that just went through a very difficult environment, but fixed-income problems don't last forever."
HOLDING OUT
Citing people briefed on the talks, the Times said Cayne is holding out for a premium near 20 percent, half what he has traditionally demanded in the past.
It is likely an investment may take the form of convertible stock, the newspaper said, similar to Bank of America's $2 billion investment last month in mortgage lender Countrywide Financial Corp.
Bear Stearns' market value is about $14.3 billion, based on reported shares outstanding as of July 6.
Buffett seeks out undervalued companies and has invested in Wall Street
before.
He took a 12 percent stake in the former Salomon Brothers in 1987 to help defend the brokerage from the advances of financier Ronald Perelman.
Four years later, Buffett became interim chairman to help Salomon clean house following a Treasury market scandal. The investment ultimately proved not one of Buffett's best.
(Reporting by Jennifer Ablan, Jennifer Coogan, Jonathan Keehner, Tim McLaughlin, Mark McSherry, Jonathan Stempel and Dan Wilchins in New York; Doris Frankel in Chicago; and Clara Ferreira-Marques in London. Writing by Jonathan Stempel.)
