Update: It's now official
JPMorgan (JPM) CEO Jamie Dimon was in talks Sunday night for a deal that would see it quintupling its original $2/share offer for Bear Stearns (BSC), the New York Times reports on its website. Dimon hopes the move will placate angry shareholders, who have vowed to fight the original deal struck a week earlier in tandem with the Fed and the Treasury.
The terms now being floated are for JPM to pay $10/share. The catch? The Fed is reportedly balking at the price, because it doesn't want the public to perceive its participation in the deal (the Fed is taking on the risk of $30B of Bear Stearns' most illiquid debt) as a bailout of over-zealous speculators.
Bear's board has also moved to authorize a 39.5% stake sale to JP Morgan, a move that would give it an upper hand in gaining majority shareholder approval. Delaware state law (both companies are incorporated in Delaware) allows companies to sell up to 40% stakes without going to the shareholders. Bear's board members own another 5%, which means it would only need 5.5% of all other shareholders to vote for the deal. It is, however, possible shareholders could seek to block the deal by claiming the proposed board move was an act of coercion.
Bear Stearns shares closed Thursday at $5.96 -- almost triple JP Morgan's original $2/share offer (which is now worth $2.50 due to gains in JPM's share price). Over the weekend, Barron's speculated a higher bid could be on the way -- perhaps even $15-20/share.
Dimon, who was at first vindictive towards opposition to the deal (he told associates he would "send Bear back into bankruptcy"), became increasingly concerned it was in jeopardy after witnessing massive backlash from Bear Stearns shareholders and employees, particularly British billionaire Joe Lewis, who sunk $1.26B into Bear over the past year. Besides offering certain key Bear employees incentives to stay on with the new company, Dimon also reached out to rival CEOs, including Morgan's (MS) John Mack and Merrill's (MER) John Thain, begging them not to recruit Bear employees during the transition period.
