JPMorgan in talks to increase Bear Stearns offer to $10 per share
Bear Stearns shares, which had already been trading higher than the initial offer price, surged above the new bid level.
The move was clearly aimed at diffusing a backlash among Bear Stearns shareholders who felt the original deal undervalued the 85-year-old institution. JPMorgan Chase Chief Executive Jamie Dimon spent most of the week trying to woo Bear Stearns employees, who collectively own about a third of the company.
"We believe the amended terms are fair to all sides and reflect the value and risks of the Bear Stearns franchise," Dimon said in a statement, "and bring more certainty for our respective shareholders, clients, and the marketplace."
The new deal values Bear Stearns at about $1.19 billion — still a fraction of what the company was worth before its sudden near-collapse earlier this month. It also includes a provision for JPMorgan to buy 95 million new Bear Stearns shares immediately, which gives it a 39.5 percent stake in the company before shareholders have even voted.
Alan Schwartz, Bear Stearns' embattled president and chief executive, has been vilified within the company for the past week for selling out too low. The company's 14,000 employees — most of whom depended on Bear Stearns' stock as part of their retirement plans — are facing significant job cuts if the deal goes through.
He said the substantial share issuance to JPMorgan "was a necessary condition" to maintaining Bear Stearns' financial stability.
"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," he said in a statement.
However, the new price still pales in comparison to the $150 per share Bear Stearns was trading at just a year ago and the near-$80 the shares fetched at the beginning of this month.
"It's a recognition that there is outrage," said David Hinkel, a senior consultant at Towers Perrin who focuses on mergers and acquisitions. But, he added, "I'm not sure upping the offer from $2 to $10 will make people happy who thought the value was $90. ... There's tremendous value and wealth being lost."
The revised deal is still the target of shareholder lawsuits.
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