AN FRANCISCO (MarketWatch) -- J.P. Morgan Chase Co. was in talks on Sunday night for a deal that would quintuple its offer for Bear Stearns Companies Inc., in an effort to pacify angry Bear shareholders, according to a media report Monday.
The sweetened offer is intended to win over stockholders who vowed to fight the original fire-sale deal, struck only a week ago at the behest of the Federal Reserve and Treasury Department, the New York Times reported in its online edition, citing unnamed according to people involved in the negotiations.
Morgan was also in negotiations with the Fed on Sunday night to assume the first $1 billion in losses on Bear assets before the Fed's $30 billion cushion kicks in, the Times said, but the Fed may now be seeking to raise that number.
Under the new purchase terms being discussed, Morgan up from its initial offer of $2 a share, a figure that represented a mere one-fifteenth of Bear's going market price, the Times said.
The Fed, which must approve any new deal, was balking at the new offer price on Sunday night after several days of frantic, secret negotiations, according to the report, and it was still possible the renegotiated deal might be postponed or collapse entirely.
If the Fed were to reject the new proposal, it could set off a furor among shareholders of both firms that the government was preventing them from making a fair deal, according to the Times.
In an unusual attempt to win approval from a majority of Bear shareholders, Bear was seeking on Sunday night to authorize the sale of 39.5% of the firm to Morgan, the Times said. Under state law in Delaware, where the companies are incorporated, a company can sell up to 40% without shareholder approval, according to the report.
The renegotiation, which would set a sale price of more than $1 billion, comes after a tumultuous week on Wall Street and in Washington because of the near collapse of Bear and the hastily devised deal to save it, the Times said..
While the initial agreement appeared to have defused the financial crisis of confidence that undid Bear, the initial terms of the deal and the government's controversial role in reaching them drew criticism from those who say the takeover amounts to a government bailout of Bear, a firm at the center of the mortgage meltdown, according to the report.
A new deal could raise even more questions about the Fed's involvement in the negotiations.
As part of the original deal, the Fed guaranteed to take on $30 billion of Bear's most toxic assets and the central bank also directed Morgan to pay no more than $2 a share for Bear to assure that it would not appear that the Bear shareholders were being rescued, the Time reported, citing people involved in the negotiations.
If the price is increased, some critics could have more ammunition to complain that taxpayers are helping to bail out a Wall Street firm that should be responsible for its own risky behavior, the Times said, adding that is one reason the Fed was hesitant on Sunday night to approve the transaction at $10 a share.
A Morgan spokeswoman declined to comment on Sunday night and a Bear Stearns representative could not be reached.
The new price would still be a small fraction of what Bear Stearns was worth before its recent meltdown. Its shares were trading at about $67 two weeks ago and as high as $170 a year ago, the Times said.
Even after Morgan announced that it would acquire Bear for $2 a share, investors bid up the stock to close at $5.96 on Friday in anticipation that a better deal would be reached, according to the report.
Some of Bear's largest shareholders have even considered voting down the deal to send the firm into bankruptcy protection, where they speculate they might get more than $2 a share from creditors, the Times said.
Some shareholders could seek to file lawsuits to block the deal, claiming that the unusual board vote was an act of coercion, according to the report.
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so now we see how government responds to the people and a billionaire. nice actually, very nice.
Bear Stearns is worth $0 without the taxpayers assuming $30 billion in piece of s@#$ level 3 securities, and now they want to increase the shareprice while taxpayers continue to bail them out???
2 minutes ago
I'm sure that piece of "news" wasn't known until the night before market open on a three day weekend.
Don't the clowns know that we know they only work bankers' hours?
Comment four:
Don't the clowns know that we know they only work bankers' hours?
Comment four:
I dont care if they offer a hundred dollars a share since I had to sell all my shares because of a margin call caused by bsc stock plunging from 30share to 2share. The feds was suppose to give 28 days not 1 trading day. I have been wiped out because of this bs. There is not saying do not put all your egss in one basket but when something is backed by the federal government does it still apply?! I wish I could be compensated for my loss.
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