March 25, 2008
With JP Morgan's Better Bear Offer, Deal (Probably) On
Photograph of Bear Stearns' headquarters (center) and JP Morgan (right) by Mark Lennihan/AP
With JP Morgan now offering $1.2 billion for troubled Bear Stearns, it's expected the deal will close on April 8. JP Morgan needed 50% of Bear Stearns shareholder approval, and the new $10/share price would give them 45% yes votes (5% is expected from bondholders); an analyst told USA Today the revised deal "virtually guarantees a yes vote at $10 per share, vs. an almost certain no vote at $2."
The Federal Reserve has given its blessing to the higher deal as well as changed its involvement. Originally, the Fed would have assume $30 billion of Bear's potential losses, but now it will "provide financing for $29 billion of Bear's most illiquid assets, with JPMorgan backing the first $1 billion of potential losses." But, as Dealbreaker points out, some are now calling this a bailout.
In spite of the more expensive price, JP Morgan CEO Jamie Dimon is still getting credit for salvaging the deal, even while paying almost a billion more. Analyst Jeffrey Harte told Bloomberg News, "When the dust settles, this will be viewed as a good transaction for JPMorgan.''
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I'm glad you're using USA Today as a source. For some reason they have covered this better than any paper I've read.
""When the dust settles, this will be viewed as a good transaction for JPMorgan."
ORLY? Buying something that is worth negative 30 billion dollars and having the US government cancel that bad debt and sell it at a 10 billion dollar discount is a good deal? No shit!
(shakes head) How did we get to this point to begin with?