Bear Stearns Deal Should Happen at $2 - MS

Morgan Stanley is out with a call on Bear Stearns (NYSE:BSC) saying their conviction level that the $2 purchase price for BSC goes through has increased. They believe JPM has negotiated a strong deal, and has well thought out protections in place. Additionally, the merger agreement and an appendix with further information is expected to be out in the next few days.

Multiple Shareholder Votes Possible: In the event that the deal is not approved at the first shareholder vote, Bear has the obligation to bring the matter back to shareholders continuously for a period of up to one year from the original acquisition date of March 16, 2008.

Fed Non-Recourse Assets: The Fed is buying up to $30B of the most risky assets from Bear and is taking the credit risk. Any new buyer would need to renegotiate with the Fed.

JPM Has Options: As protection in the event of a competing bid, JPM has the right to purchase of Bear’s headquarters. Additionally, the Wall St Journal is reporting that JPM has the option to purchase up to 19.9% of BSC at $2/share.

Low Probability of Other Potential Buyers: At this stage MSCO sees low probability of a competing bid emerging.

Potential Risk: This exists if the markets rally enough to entice someone else to bid even without the Fed guarantee. Since the effective pricing of the deal, on March 14, the AAA ABX is up between 1-3%.

Notablecalls: Not making a short call on BSC here... although tempted - especially with the stock up this AM on chatter Lewis & Co are talking to PE firms.

Comments

[User 156414]

I guess ms is talking up their bsc stock that they are busy buying.lol.

[steveballmer]

We have never said anything of the kind! MS has no interest in this bunch other than to sell them software!

[Reinko]

This is just another article with some Bear Stern stuff in it, bun none of the articles are about the question why the (former) Bear bank would need up to 13 trillion US$ of derivate contracts...

13 trillion is just 13 thousand billion and about the size of the US GDP of 2007. Likely even the FED does not know what this means exactly...

[vaduz]

find it very ingteresting new facts. maybe it would be wise to buy jpm