Bank of America to nearly double China Construction Bank stake

Bank of America Corp said it will exercise its option and increase stake in China Construction Bank, China's second biggest bank – from 10.75 per cent to 19.1 per cent - in a deal worth about $7 billion, even as it cuts jobs and digs into the government's bailout kitty.

Bank of America said it will boost its three- year-old holding in China's No 2 lender to 19.13 per cent from 10.8 per cent by buying shares from the government

Bank of America had bought 8.2 per cent stake in China Construction Bank for $3 billion in June 2005 and, in May 2008, the bank said it would exercise part of the option to purchase further common shares in the Chinese bank from 8.2 per cent to 10.75 per cent at $1.86 billion. (See: Bank of America to exercise portion of China Construction Bank option)

Once it raises its stake to 19.1 per cent, Bank of America will hold around 44.7 billion shares in China Construction Bank.

SAFE Investment Ltd (Huijin), the Chinese government body that controls China Construction Bank, will still hold a majority stake of 57.03 per cent, directly and indirectly through its wholly owned subsidiary - China Jianyin Investment Limited.

Bank of America would be able to purchase the stock of CCB at a huge discount as the Chinese bank had lost its value by 45 per cent in the past six months and the American bank is paying 32 per cent less than yesterday's closing price.