JPMorgan Buys Bear on the Cheap

With bankruptcy looming, the banks reach a deal: JPMorgan will acquire the troubled investment house for only $2 a share

In the end, Bear Stearns (BSC), the once-storied New York investment firm that became the victim of an old-fashioned run on the bank, wasn't worth much more than a subway ride.

JPMorgan Chase (JPM), the big bank that helped bail out Bear last Friday, is paying just $2 a share to take over the investment firm, which a little over a year ago was trading for as high as $170 a share. The deal to buy Bear will avert a looming bankruptcy filing by the investment firm and potentially stave off a new crisis in the financial markets.

The purchase price is an indication of just how far things have fallen at Bear, which a year ago helped spark the subprime meltdown with the collapse of its two big hedge funds. The deal values Bear at $236 million.

The Buck Stops at JPMorgan
In the end, Bear's most valuable assets weren't its legendary prime brokerage and back-office clearing operation. Rather, it was Bear's new gleaming office tower in Madison Avenue, that some value a little short of $1 billion.

As part of the transaction, the Federal Reserve, which engineered last week's emergency bailout of Bear, will provide up to $30 billion of Bear Stearns' less liquid assets. "JPMorgan Chase stands behind Bear Stearns," said Jamie Dimon, chairman and chief executive of JPMorgan. "Bear Stearns' clients and counterparties should feel secure that JPMorgan is guaranteeing Bear Stearns' counterparty risk. We welcome their clients, counterparties, and employees to our firm, and we are glad to be their partner."

Bear Stearns CEO Alan Schwartz said in a Friday conference call that "nervousness in the market" prompted clients and lenders to "get cash out" of the firm. Schwartz says, "A lot of people wanted to act from the possibility of the rumors being true." He says before the turmoil, Bear had been working with investment firm Lazard (LAZ) to explore "alternatives" and those discussions will continue. Bear officials also said the decision to seek aid from JPMorgan was their decision.

The quick collapse of Bear is a sober reminder of just how quickly a Wall Street firm can lose the confidence of investors, traders, and other institutions. A week ago, Bear executives were talking about how the firm was poised to report a profitable first quarter, after the firm posted its first quarterly loss in its history in the fourth quarter. But in the span of seven days, Bear went from being Wall Street's fifth largest firm to another in a long line of investment firms to bite the dust.

In a conference call with analysts after the deal was announced, JPMorgan executives said the big bank will stand behind all of Bear's trades and pending deals until Bear shareholders vote on the merger. JPMorgan officials said Bear will be "open for business" Monday morning. The bank officials say they fully expect Bear shareholders to approve the deal because there is no better option.


全文閱讀


出處：[businessweek]

=========
酷評：大魚吃小魚也叫help？可憐了上個拜五還30多刀買“小熊”的人。什麽時候我也用2億去help一下JPMorgan吧，呵呵。

閱讀全文/Full Story

Related Posts by Categories