TBO.com - TBO is Tampa Bay Online

Bear Stearns Approves Buyout

ADVERTISEMENT

By MADLEN READ and JOE BEL BRUNO

The Associated Press

Published: May 30, 2008

NEW YORK - Bear Stearns shareholders have approved JPMorgan Chase's buyout, ending the saga of the 85-year-old pillar of Wall Street that crumbled under the weight of its own wagers on high-risk mortgages.

The tumult is far from over, however, for JPMorgan Chase & Co., which now must mesh Bear Stearns' maverick culture with its own - and assimilate thousands of workers affected by the takeover.
Bear Stearns officially becomes part of JPMorgan Chase today, after a widely expected "yes" from 84 percent of those voting Thursday morning at Bear Stearns' midtown Manhattan headquarters.

All told, the deal was worth about $2.3 billion. JPMorgan is spending $1.4 billion for the firm itself, and spent an additional $900 million in the past six weeks buying up Bear Stearns stock to guarantee the deal would go through.

Thursday's meeting, led by Bear Stearns' chairman, James Cayne, and CEO Alan Schwartz, lasted less than 10 minutes, leaving some Bear Stearns' shareholders angry at the speed at which the deal closed.

"They were up there drinking coffee paid with my money ... and we lost our money overnight," said Hannah Horgan, a Bear Stearns shareholder. "I have nothing left, and they were so calm."

In January 2007, before mortgage defaults began clobbering banks and draining demand from the debt markets, Bear Stearns had traded at $171 a share. Now, JPMorgan is buying the firm for about $10 a share. The acquisition is resulting in thousands of layoffs at both Bear Stearns and JPMorgan.

"I think it's a shame," said Davis Edwards, who was loading the contents of his office into an SUV parked outside Bear Stearns on Thursday. Edwards worked as a mathematician for Bear Stearns for 11 years.

"This was a very prolific and lucrative firm," Edwards said. "There's a lot of good people in there."
Bear Stearns and JPMorgan are not the only companies suffering cuts - some 65,000 people have lost jobs at various banks, brokerages and lenders nationwide during the past 10 months.

But Bear Stearns got hit particularly hard. Its troubles can be traced back to June, when two of its hedge funds collapsed. Those fund casualties not only foreshadowed the investment bank's own demise, but effectively launched the recent credit crisis by showing how much damage the slumping mortgage market could incur on the companies that bought, repackaged and sold the loans.

The deal's approval comes as no surprise - since offering to take over the firm 21/2 months ago at the behest of the U.S. government, JPMorgan Chase & Co. has purchased nearly half of Bear Stearns Cos. stock, virtually guaranteeing shareholder approval.

JPMorgan also upped its initial offer of $2 a share to $10 a share after outcry from Bear Stearns shareholders, many of whom are employees that JPMorgan intends to keep on staff.

But just as the world's financial system has far to go in recovering from bad bets on debt, so does JPMorgan in its integration of Bear Stearns.

"Doing the deal is the easiest part," said John Koob, who works in mergers, acquisitions and restructuring at Towers Perrin. "When the champagne cork pops, the real work now begins."

JPMorgan shares rose 71 cents to close at $43.57, while Bear Stearns shares rose 17 cents to $9.55.

Most industry experts think the deal will be eventually be lucrative for JPMorgan.

"Six months from now, who knows whether it will be good, bad, how things will be impacted. Six years from now, people will be saying this was a good decision," said Sandler O'Neill & Partners bank analyst Jeffrey Harte.

JPMorgan has the backing of the New York Federal Reserve. The two parties said Thursday the previously announced sale of $30 billion in Bear Stearns assets to JPMorgan will happen on or around June 26.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT