NEW YORK (AP) - JPMorgan Chase said Sunday it will acquire rival Bear
Stearns in a deal valued at $236.2 million, a stunning collapse for one of the
world's largest and most venerable investment banks.
JPMorgan Chase & Co. said the $2 a share, all-stock deal has received the
required approvals from the federal government and the Federal Reserve. Bear
Stearns shares close Friday at $30 a share.
The Fed will provide special financing to JPMorgan Chase for the deal,
JPMorgan Chase said. The central bank has agreed to fund up to $30 billion of
Bear Stearns' less liquid assets.
At almost the same time as the deal for control of Bear Stearns was
announced, the Federal Reserve said it approved a cut in its lending rate to
banks to 3.25 percent from 3.50 percent and created another lending facility for
big investment banks. The central bank's official meeting is on Tuesday. Before
the emergency move to lower the discount rate, which is the rate at which banks
lend each other money, the Fed was widely expected to again cut its headline
rate by as much as a full point to 2 percent.
The announcement from both the Fed and JPMorgan comes ahead of what some
analysts expected to be a brutal day for global stocks. Already, before the
announcements, New Zealand's markets opened drastically lower -- then began to
recover after the deal was unveiled.
A collapse of Bear Stearns could have created a further crisis of confidence
in world financial markets amid a deepening credit crunch. JPMorgan's
acquisition of Bear Stearns represents roughly 1 percent of what the investment
bank was worth just 16 days ago.
The deal represented a 93.3 percent discount to Bear Stearns' market
capitalization as of Friday, and roughly a 98.8 percent discount to its book
value as of Feb. 29.
"The past week has been an incredibly difficult time for Bear Stearns," said
Bear Stearns Chief Executive Alan Schwartz in a statement. "This represents the
best outcome for all of our constituencies based upon the current
circumstances."
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