NEW YORK (AP) - JPMorgan Chase & Co. increased it offer Monday for Bear
Stears Cos. to $10 per share from a bargain-basement price of $2 per share,
hoping to assuage shareholders of the ailing investment bank.
Bear Stearns shares, which had already been trading above the initial offer
price, more than doubled.
There was a backlash last week among Bear Stearns shareholders who felt the
original deal undervalued the 85-year-old institution. JPMorgan Chase Chief
Executive Jamie Dimon spent most of the week trying to woo Bear Stearns
employees, who collectively own about a third of the company.
"We believe the amended terms are fair to all sides and reflect the value
and risks of the Bear Stearns franchise," Dimon said in a statement, "and bring
more certainty for our respective shareholders, clients, and the marketplace."
The new deal values Bear Stearns at about $1.19 billion -- still a fraction
of what the company was worth before its sudden near-collapse earlier this
month. It also includes a provision for JPMorgan to buy 95 million new Bear
Stearns shares immediately, which gives it a 39.5 percent stake in the company
before shareholders have even voted.
The amended offer was Dimon's attempt to ward off any competition, and
quickly move on with the acquisition. The two sides also changed certain
guarantees JPMorgan made related to Bear Stearns' positions, though details were
not immediately clear.
The new agreement also calls for the Federal Reserve -- which helped broker
the emergency deal to save Bear Stearns from failure -- to provide slightly less
financing. JPMorgan will bear the first $1 billion of any losses linked to Bear
Stearns assets being financed, while the central bank will put up the remaining
$29 billion.
There was no immediate comment from the Federal Reserve.
Alan Schwartz, Bear Stearns' embattled president and chief executive, has
been vilified within the company for the past week for selling out too low. The
company's 14,000 shareholders -- most of whom depended on Bear Stearns' stock as
part of their retirement plans -- are facing significant job cuts if the deal
goes through.
He said the substantial share issuance to JPMorgan "was a necessary
condition" to maintaining Bear Stearns' financial stability.
"Our board of directors believes that the amended terms provide both
significantly greater value to our shareholders, many of whom are Bear Stearns
employees, and enhanced coverage and certainty for our customers,
counterparties, and lenders," he said in a statement.
Bear shares had been much higher than its deal price last week in
anticipation of a new buyout agreement. The stock more than doubled on Monday,
rising $6.89 to $12.85 after the new agreement was unveiled.
JPMorgan shares also rose, adding 96 cents, or 2.1 percent, to $46.93 in
morning trading.
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