J.P. Morgan on Verge of Buying Bear for $20/Share

WSJ reports Bear Stearns Companies (BSC) and J.P. Morgan & Chase (JPM) are pushing hard to complete a deal which would see JPM buy the fallen star for under $20/share, one-third lower than Friday's $30 close. Bear in mind shares peaked at $170 just over one year ago.

Treasury Dept. spokeswoman Michele Davis said Sunday afternoon it was expected a deal would be closed by early evening, before the Asian markets open, but cautioned, "None of these things is done until they're done." One point of contention was how much of Bear's risk J.P. Morgan would absorb; sources say CEO James Dimon was reluctant to pursue the deal "without certain assurances that would protect his firm's exposure."

Financial regulators have a vested interest in the acquisition: A Bear failure could snowball into a systemic financial market crisis, because Bear trades with virtually every other firm on Wall Street. Still, Bear is preparing for the possibility of a bankruptcy filing in case talks break down; it is possible such a filing could take place before the Monday open of overseas markets.

A $20/share price tag would leave Bear shareholders with just $2.24B, meaning its entire banking franchise is worth about $1B after netting out its Madison Ave. headquarters which are worth about $1.2B.

Comments

[dan clue:]

I would like to see Etrade be bought out it seems to be lacking leadership. The board is a hollw shell that has continuously ignored their shareholders like myself. I email them once a week over the last six weeks and I get zero responses. I'm believeing either Etrade has extremly bad news or they are negociating a buyout. They should report feb results but Layton is refusing to give investors any insite.

2008 Mar 16 04:45 PM

[Godzilla:]

It's a darn shame. The folks employed there at Bear are an intelligent, hard working bunch of professionals.

2008 Mar 16 05:33 PM

[prescient11:]

DanBlue - a known basher of Etrade. Why don't you shut up and learn how to spell. Here you see what the problem of leverage gets you. Etrade has no leveraged assets and is flush with cash - and has a powerful backer in Citadel. Unfortunately, BSC is nowhere near as strong as Etrade and thus had to go to JPM for a total sale.

2008 Mar 16 05:37 PM

[ratsharp:]

$20.. i think people find it hard to believe a rumour of $2 ..and so multiply it by 10 ...thats the level of truth and distortion in this market ...evrything factored by 10 ..hehe

2008 Mar 16 07:41 PM

[Sasha B:]

wow $2 ... and it's not cash ... it's $2 of JPM stocks ... that's a bummer ... I think I just saw a black swan

2008 Mar 16 07:45 PM

[Jethro:]

Now what!? Hold on to something worth 1/50th what I paid or take the loss here. I can not believe this deal happened at $2/share.

2008 Mar 16 08:04 PM

[venividivici:]

This is a skyscraper built out of playing cards and it's coming down regardless of how many helicopters Uncle Ben puts into the air.

2008 Mar 16 10:42 PM

[vaduz:]

the fed doesnt want to be blamed of moral hazard. at 2 they will succeed

2008 Mar 24 05:19 PM