JPMorgan Boosts Offer for Bear Stearns Buyout
RENEE MONTAGNE, host:
NPR's business news starts with a better deal for Bear Stearns.
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MONTAGNE: Wall Street investment bank JPMorgan Chase has agreed to pay more money for the troubled securities firm Bear Stearns. Last week, Bear Stearns had a near meltdown because of the credit crises, and JPMorgan was hoping to scoop up the firm at a fire sale price. It almost did, until top shareholders in Bear Stearns baulked. NPR's Jim Zarroli reports.
JIM ZARROLI: JPMorgan Chase says it will pay the equivalent of a about $10 a share for Bear Stearns, which is about five time the previous price, but still far below what the stock was fetching a year ago. Bear announced on March 14th that it was undergoing a severe cash crunch. Investors had been pulling money out of the firm because of anxiety about its mortgage losses. Two days later, JPMorgan Chase said it was acquiring the firm in a deal that had been brokered by the Federal Reserve. The Fed also agreed to help finance the acquisition, protecting JPMorgan against potential losses. The deal valued Bear Stearns at the bargain basement price of $2 a share, or $236 million in total. And some shareholders said they would oppose the deal. JPMorgan Chase said the new deal would provide significantly greater value to shareholders, many of whom are Bear Stearns employees.
The terms of the deal have also been changed so that JPMorgan Chase will now bear the first $1 billion of losses from any of Bear's debt. The Fed will cover the remaining losses up to $29 billion. Some critics had attacked the terms of the acquisition, saying it put tax payers on the hook for Bears' bad investment decisions. JPMorgan Chase chairman Jamie Dimon said he believes the new terms reflect the values and risks of the company, and he said he looks forward to closing the deal promptly. Jim Zarroli, NPR News, New York.