At $10/share, JPMorgan's Bear hug gets a lot tighter
JPMorgan Chase raised its all-stock offer for Bear Stearns to about $10 a share in a move to appease disgruntled shareholders. Experts' view on market
By Agencies |
NEW YORK :JPMorgan Chase on Monday raised its all-stock offer for Bear Stearns to about $10 a share, roughly five times its original bid, in a move to appease disgruntled shareholders. Under the revised deal, JPMorgan will be allowed to buy 95 million newly issued Bear Stearns shares and Bear���s board agreed to vote in favour of the deal.
With those shares, JPMorgan would have a 39.5% stake in Bear Stearns, in reach of a majority stockholding. The new deal, which has financial backing from the Federal Reserve, is likely to raise concerns that the US government is prepared to help rescue a failing Wall Street bank while declining to bail out millions of home owners facing the possibility of foreclosure.
JPMorgan���s original offer on March 16 of $2 per share in stock for Bear was widely considered a fire-sale price for the 85-year-old Wall Street investment bank. Bear, recently ranked as the fifth-largest US investment bank, collapsed as large subprime mortgage losses and falling confidence in the company prompted a run on the bank. Bear Stearns shares surged 80% to $11.52 on the news. JPMorgan shares rose 3.6% to $47.64.
���Clearly, this increases the chance the deal goes through,��� said James Ellman, a portfolio manager with Seacliff Capital. ���But there are still going to be employees and shareholders unhappy with $10 a share.��� ���At the end of the day, JPMorgan has such a strong hand, and Bear Stearns is so weak, JPMorgan will likely win.��� said Ellman.
���We believe the amended terms are fair to all sides and reflect the value and risks of the Bear Stearns franchise,��� Jamie Dimon, JPMorgan���s chairman and chief executive, said in a statement. ���We look forward to a prompt closing.���
Under the revised deal, each share of Bear Stearns common stock will be exchanged for 0.21753 share of JPMorgan common stock. The previous exchange offer was 0.05473 JPMorgan share for each Bear Stearns share. JPMorgan said it expects to complete the purchase by April 8.
With the new shares, the offer values Bear Stearns at about $2.1 billion, compared with the previous offer, which valued Bear at about $236 million. The price tag will be even higher.
With those shares, JPMorgan would have a 39.5% stake in Bear Stearns, in reach of a majority stockholding. The new deal, which has financial backing from the Federal Reserve, is likely to raise concerns that the US government is prepared to help rescue a failing Wall Street bank while declining to bail out millions of home owners facing the possibility of foreclosure.
JPMorgan���s original offer on March 16 of $2 per share in stock for Bear was widely considered a fire-sale price for the 85-year-old Wall Street investment bank. Bear, recently ranked as the fifth-largest US investment bank, collapsed as large subprime mortgage losses and falling confidence in the company prompted a run on the bank. Bear Stearns shares surged 80% to $11.52 on the news. JPMorgan shares rose 3.6% to $47.64.
���Clearly, this increases the chance the deal goes through,��� said James Ellman, a portfolio manager with Seacliff Capital. ���But there are still going to be employees and shareholders unhappy with $10 a share.��� ���At the end of the day, JPMorgan has such a strong hand, and Bear Stearns is so weak, JPMorgan will likely win.��� said Ellman.
���We believe the amended terms are fair to all sides and reflect the value and risks of the Bear Stearns franchise,��� Jamie Dimon, JPMorgan���s chairman and chief executive, said in a statement. ���We look forward to a prompt closing.���
Under the revised deal, each share of Bear Stearns common stock will be exchanged for 0.21753 share of JPMorgan common stock. The previous exchange offer was 0.05473 JPMorgan share for each Bear Stearns share. JPMorgan said it expects to complete the purchase by April 8.
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With the new shares, the offer values Bear Stearns at about $2.1 billion, compared with the previous offer, which valued Bear at about $236 million. The price tag will be even higher.
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