JPMorgan Chase & Co. agreed to quadruple its offer for Bear Stearns Cos. in an effort to overcome opposition from shareholders of the crippled securities firm. Bear Stearns stock almost doubled.
Shareholders of the company, once the biggest underwriter of mortgage bonds in the U.S., will receive 0.21753 JPMorgan shares for each Bear Stearns share they hold, the New York-based banks said today in a statement. That values Bear Stearns at about $2.4 billion, or about $10 a share. Under the terms of the deal the two firms struck on March 16, the takeover price had been $2.52 a share, based on last week's closing price.
Bear Stearns surged 91 percent to $11.40 at 10:47 a.m. in New York Stock Exchange composite trading. JPMorgan, led by Chief Executive Officer Jamie Dimon, also struck a deal to acquire 39.5 percent of the company by buying newly issued shares. Bear Stearns directors will vote their own holdings in favor of the sale, the companies said.
``This will help the deal go through,'' said George Ball, who's worked on Wall Street for more than 40 years and now leads brokerage firm Sanders Morris Harris Inc. ``The price is still catastrophically low, but it will change the attitude of people who stay at Bear. Those are the people Jamie needs to win over.''
Bear Stearns will issue 95 million new shares without seeking shareholder approval, the companies said. Dimon will need only an additional 10 percent of shareholders to approve the takeover. Employees' total stake will drop to about one fifth from one third once the company issues the new stock. Bear Stearns board members, who own a total of 7.2 million shares, will control about 3 percent, according to Bloomberg data.
Sealing the Deal
The original bid, more than 90 percent lower than the securities firm's market value at the start of the month, drew opposition from shareholders led by U.K. billionaire Joseph Lewis. Dimon met with Bear Stearns employees to seek their support last week.
The Federal Reserve helped engineer the takeover two weeks ago after customer withdrawals crippled the New York-based firm. The central bank agreed at the time to provide $30 billion of ``special financing,'' to guarantee some of Bear Stearns's assets.
The Fed adjusted its financial support today, the two firms said. JPMorgan will now be responsible for the first $1 billion of potential losses from the sale of Bear Stearns assets, while the Fed will fund the remaining $29 billion.
``The Fed must have given the nod; this wouldn't have been announced otherwise,'' said Sanders Morris's Ball.
Bear Stearns climbed 12 percent to $5.96 on March 20 in New York on speculation JPMorgan, the third-largest U.S. bank, might raise its bid or risk prompting rival offers.
Lenders Flee
The stock, which peaked at $171.51 last year, closed at $30 two days before Chief Executive Officer Alan Schwartz, 58, was forced to accept JPMorgan's terms or face bankruptcy after customers and lenders abandoned the broker. The Fed agreed to provide as much as $30 billion to JPMorgan to get the deal done.
Lewis and James ``Jimmy'' Cayne, Bear Stearns's 74-year-old former chief executive officer, were trying to recruit investors to counter JPMorgan's offer, the New York Post reported last week, citing people familiar with the situation. Cayne, who remains non-executive chairman of the company, is among the directors who have agreed to vote their own shares in favor of the amended sale agreement, according to the companies' statement.
No Solicitation
``Finding a counterbidder is attractive but a lot more difficult,'' the Sunday Telegraph cited Lewis as saying in a report yesterday. ``There are two ways to block the deal: first by a shareholder no vote and second by litigation. We should be able to block the deal by one of these ways.''
Lewis spokesman Doug McMahon didn't return a call today seeking comment.
Bear Stearns employees, directors and lawyers are prohibited from seeking an alternative transaction, according to the agreement, which was filed with regulators last week.
Bear's financial troubles began in July, when two hedge funds that invested in securities tied to U.S. subprime mortgages collapsed. The firm had to bail out the funds and take possession of many of their instruments
No comments:
Post a Comment