JPMorgan Chase Raises Bear Stearns Offer
POSTED on March 25, 2008
NEW YORK - JPMorgan Chase has upped the
offer of its merger agreement with Bear Stearns from $2 per share
to $10.
Under the revised terms, each share of Bear Stearns
common stock would be exchanged for 0.21753 shares of JPMorgan
Chase common stock (up from 0.05473 shares), reflecting a value
of approximately $10 per share of Bear Stearns common stock based
on the closing price of JPMorgan Chase common stock on the New
York Stock Exchange on March 20, 2008.
In addition, JPMorgan Chase and Bear Stearns entered
into a share purchase agreement under which JPMorgan Chase will
purchase 95 million newly issued shares of Bear Stearns common
stock, or 39.5% of the outstanding Bear Stearns common stock
after giving effect to the issuance, at the same price as provided
in the amended merger agreement. As discussed below, the purchase
of the 95 million shares is expected to be completed on or about
April 8, 2008.
The Boards of Directors of both companies have
approved the amended agreement and the purchase agreement. All
of the members of the Bear Stearns Board of Directors have indicated
that they intend to vote their shares held as of the record date
in favor of the merger.
JPMorgan Chase has also agreed to guarantee Bear
Stearns' borrowings from the Federal Reserve Bank of New York.
The Federal Reserve Bank of New York's $30 billion
special financing associated with the transaction has also been
amended so that JPMorgan Chase will bear the first $1 billion
of any losses associated with the Bear Stearns assets being financed
and the Fed will fund the remaining $29 billion on a non-recourse
basis to JPMorgan Chase.
"We believe the amended terms are fair to
all sides and reflect the value and risks of the Bear Stearns
franchise," said Jamie Dimon, Chairman and Chief
Executive Officer of JPMorgan Chase, "and bring more certainty
for our respective shareholders, clients, and the marketplace.
We look forward to a prompt closing and being able to operate
as one company."
"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,"
said Alan Schwartz, President and Chief Executive Officer
of Bear Stearns. "The substantial share issuance to JPMorgan
Chase was a necessary condition to obtain the full set of amended
terms, which in turn, were essential to maintaining Bear Stearns'
financial stability."
Facing potential collapse last week, Bear Stearns
was bought by JPMorgan Chase for just $2 per share, a stunning
decline for a company whose stock traded at more than $60 per
share earlier this month. Many investors and employees were outraged
by the low price and wanted JPMorgan Chase to raise its bid or
find another buyer.
JP Morgan agreed to provide emergency financing
for Bear Stearns after a run on the bank's cash by clients.
JP Morgan is located just a block away from Bear
Stearns headquarters on Madison Avenue (pictured above).
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