JPMorgan moves closer to owning Bear Stearns

JPMorgan Chase & Co., the third- largest U.S. bank, completed a share exchange that moves it closer to completing the acquisition of Bear Stearns Cos.

JPMorgan purchased 95 million newly issued shares of Bear Stearns common stock, or 39.5 percent of the shares outstanding, in exchange for about 20.7 million shares of the bank's stock, New York-based JPMorgan said today in a statement.

The two banks came up with the swap when faced with a revolt from Bear Stearns shareholders unhappy with the price JPMorgan had offered for their stock last month. The bigger bank quadrupled its offer to appease investors and its smaller rival agreed to issue new shares to increase the chances of the deal getting approved by shareholders.

"The chances of it not getting completed by May 14 is very, very small," said Nancy Havens, president of Havens Advisors LLC, a hedge fund that specializes in merger arbitrage. The swap will prevent a shareholder rejection, Havens said in a television interview.

The New York Stock Exchange last week gave the green light for Bear Stearns to issue the shares, done without seeking shareholder approval. The investment bank used an exemption to NYSE rules that allows such an issuance in times of urgency.

JPMorgan is giving 0.21753 JPMorgan shares for each Bear Stearns share. That values each Bear Stearns share at $9.90 based on yesterday's closing price for JPMorgan stock. Bear Stearns fell 23 cents to $10.44 at 12:13 p.m. today in New York Stock Exchange composite trading. JPMorgan declined 51 cents to $45.04.