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The Deal of the Year: JP Morgan Buys Bear Stearns

Mar. 17, 2008 6:04 AM ETJPM, BSC, LAZ7 Comments
Mark McQueen profile picture
Mark McQueen

$236 million sounds like a lot of money, certainly a great deal more than the “$2/share” that JP Morgan (JPM) is paying to acquire Bear Stearns (BSC). The purchase price doesn’t sound stupendous when compared to the $80 book value per share that Bear Stearns’ CFO claimed on Friday to be the appropriate figure of his soon-to-be-former securities dealer.

Can you imagine the negotiations between JP Morgan and Lazard (LAZ), acting on behalf of Bear’s Board of Directors?

Lazard: The stock closed at $30 on Friday, and shareholders will want to see a decent lift from here if they’re going to support a deal.

JP Morgan: How about $5 a share? That’s what the HQ is worth right now in a tough real estate market. The rest of the business is a wash.

Lazard: Are you kidding? We’ve got J.C. Flowers. Citadel Investment Group. KKR. CITIC. All big names with deep pockets. They’re down the hall right now, pouring over the books.

JP Morgan: None of them can close in 28 days, which is all the time we’ve agreed to provide the $30 billion of Fed-backed emergency funding for. And since none of them are domestic banks, the Fed won’t utilize them as conduits for this, shall we say, unusual funding scheme. Citigroup’s hands are full. Soc Gen can’t play. Lehman Brothers doesn’t even want to admit they’ve ever heard of Bear Stearns, for fear that counterparties start to look askance at them, as well. We are it.

Lazard: Fair enough. But $5? The stock was $120 last summer when Jimmy Cayne was golfing and bridging his way throught the meltdown of our two hedge funds. Do you know how much money this will cost him?

JP Morgan: We don’t want to buy an investment

This article was written by

Mark McQueen profile picture
Mark McQueen is President & CEO of Wellington Financial LP, a privately-held corporate debt fund with offices in San Francisco, Santa Monica and Toronto. He has led Wellington's growth from its inception as a $7 million fund in 2000 to its current $600 million investment program ($200 million fund size). He was previously a Managing Director and Head of Technology Investment Banking of a leading independent investment bank, and before that part of a team that advised on over $25 billion in transactions as a member of the Mergers and Acquisitions group at a Canadian bank-owned investment dealer. Mark received credit training at a Canadian Chartered bank and was certified for commercial lending in 1995. He currently serves as the Chairman of the Toronto Port Authority, and several non-profit organizations. He is not licenced to give investment advice. All posts are Opinion Pieces and were copied by Seeking Alpha from their original publication site at www.wellingtonfund.com/blog. Visit his site: Wellington Financial (http://www.wellingtonfund.com/) and blog (http://www.wellingtonfund.com/blog/index.php)

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Comments (7)

He dollar cost average was around $106- $107 dollar. With stocks valuing close to over a billion dollar.
Jimmy Cayne who lost a big chunk of his net worth, which every one of us blaming him for his golf, and bridge games ??
12 Sep. 2008

Concept; name; Wasserstein = savior & triumphant
18 Mar. 2008
Waking up - Just watched that movie and thought the same thing.

Time to buy JPM I guess, right?
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Watch the movie Zeitgeist...then it will all become very clear..it is all so predictable
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Not quite the bargain you indicate when you add in the estimated costs of 6B JPM will incur to pay off BSC liabilities and lawsuits. BSC's creditors and clients are the immediate benefactors. Maybe JPM too but it'll take a few years for that to play out.
BSC getting bought for $2 dollars. I saw that on my bloomberg screen, I thought it might be wrong, or it would be corrected to $20 dollar. When I have it verified through the other news network. I am just amazed that a company whose book value is over $75 dollars is getting sold for $2 dollar. What really happen, there new office building alone is worth over a billion dollar. And prime brokerage should be another billion >?

What happen to Joseph Lewis, billionaire FOREX trader. He lost all his money he invested with BSC. He dollar cost average was around $106- $107 dollar. With stocks valuing close to over a billion dollar.
Jimmy Cayne who lost a big chunk of his net worth, which every one of us blaming him for his golf, and bridge games ??

Did BSC did really help us get the deal close, to save the over all market. Or it is the "Plunger Protection Team". Or was there an out side agreement between the BSC Executive, and FED's.

Practically it is the FED bailing them out, omnimus sign on wall street ? We are looking for a 1% point rate cut, if not the rate cut would not really boost the market. In this time, the confidence of the market is really shattered. The idea is it would not go over night, we are going through a bad patch.

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