JPMorgan Chase and Co. announced over the weekend that it is preparing to acquire Bear Stearns Companies. The Boards of Directors of both companies have unanimously approved the transaction.
The transaction will be a stock-for-stock exchange and JPMorgan Chase will exchange 0.05473 shares of JPMorgan Chase common stock per one share of Bear Stearns stock.
Based on the closing price of March 15, 2008, the transaction would have a
value of approximately USD2 per share.
Effective immediately, JPMorgan Chase is guaranteeing the trading obligations
of Bear Stearns and its subsidiaries, and is providing management oversight for
its operations. Other than shareholder approval, the closing is not subject
to any material conditions.
The transaction is expected to have an expedited close by the end of the calendar second quarter 2008. The Federal Reserve, the Office of the Comptroller of the Currency (OCC) and other federal agencies have given all necessary approvals.
In addition to the financing the Federal Reserve ordinarily provides through its Discount Window, the Fed will provide special financing in connection with this transaction. The Fed has agreed to fund up to USD30bn of Bear Stearns' less liquid assets.
"JPMorgan Chase stands behind Bear Stearns," announced Jamie Dimon, Chairman and Chief Executive Officer of JPMorgan Chase, on Sunday.
"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," he confirmed.
Dimon added:
"This transaction will provide good long-term value for JPMorgan Chase
shareholders. This acquisition meets our key criteria: we are taking reasonable
risk, we have built in an appropriate margin for error, it strengthens our business,
and we have a clear ability to execute."
"The past week has been an incredibly difficult time for Bear Stearns.
This transaction represents the best outcome for all of our constituencies based
upon the current circumstances," explained Alan Schwartz, President and
Chief Executive officer of Bear Stearns. "I am incredibly proud of our
employees and believe they will continue to add tremendous value to the new
enterprise."
The transaction is expected to be ultimately accretive to JPMorgan Chase's
annual earnings.
"This transaction helps us fill out some of the gaps in our franchise with
manageable overlap," Steve Black, co-CEO of JPMorgan Investment Bank went
on to suggest, adding that:
"We know the Bear Stearns leadership team well and look forward to working with them to bring our two companies together."
"Acquiring Bear Stearns enables us to obtain an attractive set of businesses," concluded Bill Winters, co-CEO of JPMorgan Investment Bank.
"After conducting due diligence, we're comfortable with the quality of Bear Stearns' business, and are pleased to have them as part of our firm," Winters stated.
Bear Stearns had previously denied that its finances were in trouble as a result of the ongoing US economic crisis.
Last week, the company stated that there was "absolutely no truth to the rumors of liquidity problems that circulated today in the market".
Alan Schwartz announced at the time that: "Bear Stearns' balance sheet, liquidity and capital remain strong."
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