NEW YORK – JPMorgan Chase & Co. quadrupled its offer for The Bear Stearns Cos. to $10 per share, from the previous $2.42, and struck a deal to buy a 39.5-percent stake in the company without shareholder approval, making it unlikely opponents can block the takeover, Bloomberg News reported today.
“It is a done deal,” Bruce Foerster, who was a managing director at Lehman Brothers before launching Miami-based advisory firm South Beach Capital Markets. “The agitation by shareholders got a better price,” he added, “but this ends the uncertainty.” The original March 16 bid for $240 million – less than 10 percent of the firm’s market value at the beginning of the month – was opposed by shareholders led by U.K. billionaire Joseph Lewis.
Bear Stearns agreed to issue 95 million new shares in new stock as part of the transaction, and the firm’s directors agreed to vote their own holdings in favor or the sale, the companies said today. The new deal values Bear Stearns at $2.4 billion, Bloomberg said, but it will pay current shareholders about 60 percent of that amount, or $1.5 billion.
The Federal Reserve last week helped engineer the takeover bid by agreeing to provide up to $30 billion in special financing to guarantee some of the firm’s “less-liquid assets.” Today, the Fed adjusted its support for the deal, so JPMorgan will be responsible for the first $1 billion of potential losses, while the central bank will back the remaining $29 billion, the firms said. (READ MORE)
U.S. stocks rose to their highest level this month on news of the firmed-up Bear Stearns deal, the new higher limit for Federal Home Loan Banks’ purchases of mortgage-backed bonds, and a rise last month in existing home sales nationwide. (READ MORE)
The Standard & Poor’s 500 Index added 20.37 points for the day, or 1.5 percent, to close at 1,349.88, as nine of its 10 industry groups advanced, Bloomberg News said. The Dow Jones Industrial Average rose 187.32 points, or 1.5 percent, to 12,548.64; the Nasdaq Composite Index rose 68.64, or 3 percent, to 2,326.75 points.
Bear Stearns shares rose $5.29 or 89 percent to $11.25, while financial shares in the S&P 500 rose 0.7 percent as a group and nine stocks rose on the New York Stock Exchange for every two that fell today.
