Page last updated at 21:00 GMT, Monday, 24 March 2008

JP Morgan raises Bear Stearns bid

JP Morgan offices, New York
Analysts say there may still be doubts about the JP Morgan offer

JP Morgan Chase has raised its offer for Bear Stearns to $10 (5) a share, from the original offer of $2 a share.

Under the deal, JP Morgan Chase is also buying 95 million newly issued Bear Stearns shares, or 39.5% of the bank.

The initial offer angered many Bear shareholders who thought the company was being sold at a bargain price.

Including the new shares, the latest offer values Bear Stearns at about $2.1bn, still a fraction of its value before the near collapse 10 days ago.

Purchasing the extra shares puts JP Morgan Chase in a much stronger position to push through the takeover.

'Increased chance'

The price of Bear Stearns shares almost doubled. They closed at $11.25, up $5.29. JP Morgan Chase ended up 1.2% at $46.55.

But analysts say there will still be doubts, despite the sweetened offer.

"Clearly this increases the chance the deal goes through, but there are still going to be employees and shareholders unhappy with $10 a share," said James Ellman, Portfolio Manager at Seacliff Capital in San Francisco.

JP Morgan Chase also agreed to change the guarantees it is receiving from the US Federal Reserve.

The investment bank will now take on the first $1bn of any Bear Stearns' losses and the Fed will fund remaining $29bn.

Credit crunch

The raised offer might calm shareholders who feel that Bear Stearns was sold at a bargain price.

Bear Stearns, a victim of the credit crunch, was sold as confidence in the bank fell and clients withdraw funds.

The bank got into trouble when other banks refused to lend it money over fears that it had too many bad debts due to the sub-prime mortgage crisis. Clients were worried about Bear Stearns exposure to investments in assets backed by US mortgages.

It had been reported that the Fed was reluctant to agree to a raised offer as it did not want to appear to be bailing out Bear Stearns shareholders.

Many of those shareholders have seen their investment decimated.


RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites


FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC iD

Sign in

BBC navigation

Copyright © 2019 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific