Legendary investor Warren Buffett may be considering buying a minority stake in the nation's fifth-largest investment bank, according to a New York Times report.
The newspaper reported on its Web site Wednesday that Bear Stearns Cos. had been talking with Buffett and several other possible investors, including Bank of America Corp., Wachovia Corp. and two Chinese institutions: the Citic Group and China Construction Bank. The Times story relied on anonymous sources who had been briefed on the discussions.
Bear Stearns shares jumped as much as 12 percent after the report that it might be negotiating the sale of a part of the company, and the shares closed up $8.76, or 7.7 percent, to $123. At least two analysts upgraded Bear Stearns because of the speculation.
Andy Kilpatrick, the stockbroker-author of "Of Permanent Value, the Story of Warren Buffett," said it seems like only one in about 12 rumors about what Buffett's Berkshire Hathaway Inc. might buy is true.
But this time there's a connection: Buffett and Bear Stearns Chief Executive James Cayne are friends and have played bridge together in the past.
"I would believe Buffett is talking to them because they are friends, but how far it's gone who knows," Kilpatrick said.
Buffett typically doesn't discuss specific investments beforehand, and Berkshire spokeswoman Jackie Wilson declined to comment Wednesday.
Punk Ziegel analyst Dick Bove upgraded Bear Stearns from "sell" to "market perform" Wednesday because he was encouraged by the rumors that someone may invest in the Wall Street brokerage.
"The company was in too much trouble to solve its problems on its own," Bove said.
Bove said Bear Stearns needs significant financial backing so it can be more competitive, and it needs to diversify its business away from mortgages. He said Bear Stearns also needs help expanding internationally and could use new management.
But Bove said he did not think Buffett would be the one to invest in Bear Stearns because Berkshire doesn't seem like a good fit for the brokerage's needs.
Plus, Buffett routinely states in his annual letter to shareholders that Berkshire won't participate in bidding wars for acquisitions.
Standard & Poor's analyst Matthew Albrecht also upgraded Bear Stearns Wednesday from "strong sell" to "hold." He said in a research note that investor sentiment about the company had improved.
Bear Stearns declined to comment earlier in the day on reports it would sell a stake in itself, and it did not immediately respond to messages left Wednesday afternoon seeking comments on the newspaper report.
Officials at Bank of America and Wachovia, which are both based in Charlotte, N.C., declined to comment on the market speculation about a Bear Stearns deal.
Class A shares of Berkshire stock gained $100 to close at $116,990 Wednesday.
Berkshire owns furniture, insurance, jewelry and candy companies, restaurants, natural gas and corporate jet firms and has major investments in such companies as The Coca-Cola Co. and Wells Fargo & Co.
AP Business Writers Ieva M. Augstums in Charlotte, N.C., and Joe Bel Bruno in New York contributed to this report.
On the Net:
Berkshire Hathaway Inc.: http://www.berkshirehathaway.com
Bear Stearns Cos.: http://www.bearstearns.com