JP Morgan To Buy Bear Stearns For $2/Share

JP Morgan (JPM) has agreed to purchase Bear Stearns (BSC) for $2/share, according to a source at the Wall Street Journal. Both boards have approved the transaction, and everyone involved is working hard to finalize the agreement as soon as possible. The deal will be an all stock transaction, with Bear stockholders receiving 0.05473 shares of JPM common stock per one share of Bear Stearns. The deal values Bear at $236 million; BSC's market value at the end of trading Friday was $3.54 billion.

Bear employees were hoping that a foreign company would win the bid for the firm, keeping the possibility that a large amount the positions in the company would be spared. Also, nearly one-third of the outstanding shares of the company are owned by its employees. If the deal falls apart, bankruptcy will also be a possibility. With the news, the FOMC's meeting this week becomes even more pivotal. Calls for a full-point cut will grow stronger as news of Bear's fallout spreads.

Comments

[bryanz:]

"Too big to fail"

Market cap of almost $40B to $236M in 6 months? Ouch.
Sorry to all the employees and shareholders. That's one hell of a fall.

2008 Mar 16 08:52 PM

[catman2:]

Why is the fed not prosecuting the exec of these banks like they did Enron.. they made bad / unsecured loans and loans they knew were impossible to pay off and all for the big salaries and bonuses ... So lets start prosecuting the bank execs responsible. As is the taxpayers ultimately are going to have to bail them out

2008 Mar 16 10:01 PM

[Mark Moran:]

Is JPM simply a stalking horse ? Bankruptcy wasn't a viable option because the Bankruptcy Code, as recently amended, would have allowed many of Bear's counterparties to seize collateral. For Bear not to fully implode, it needed a deep pocket to step into its shoes by tonight. JPM was the only one that could move that quickly, and even they could only do it with some support from the Fed. But now that the emergency crisis is over, when the smoke clears, are some of the other bidders at the table going to get together and bid higher ?

2008 Mar 16 10:21 PM

[RMG:]

This is a tragedy for investors and emphasizes the need for Federal Government to control the banks and other institutions when it comes to over-leveraging with shareholders' money. Initially I was thinking JP Morgan was taking undue advantage of Bear Stearns situation by offering only $2 /share, but then realized that they are taking lot more risk just to calm the markets. Now they (JPM) will be more leveraged as a result of takeover of Bear Stearns.

2008 Mar 16 10:59 PM

[BxCap:]

Oh, if only Microsoft could do that to Yahoo!

2008 Mar 16 11:17 PM

[sammyg123:]

Bear Stearns was a PIG, and they deserve what they got. JP Morgan stepped in an picked up BSC at close to it's par value! They were generous to give them 2 dollars a share. BSC has always been unethical, and so they are reaping it. I can't wait to see the pink slips coming in for management. I am sure there are a few good people there, at BSC, but I am not shedding a tear. This is a good thing, and JPM did us all a favor by wiping that clump off the history books. Bravo! Bravo! Bravo!

2008 Mar 17 12:26 AM