JPMorgan Chase announced this morning that it had revised the terms for a takeover of beleaguered investment bank and mortgage lender Bear Stearns, upping the bid to $10 a share from just $2 previously.
Bear Stearns common stock would now be exchanged for 0.21753 shares of JPMorgan Chase common stock (up from 0.05473 shares), based on Chase’s Thursday closing price.
Additionally, Chase and Bear have entered into a share purchase agreement in which Chase will buy 95 million newly issued shares of Bear Stearns, or 39.5 percent of the outstanding stock after the issuance, for the same price.
“We believe the amended terms are fair to all sides and reflect the value and risks of the Bear Stearns franchise,” said Jamie Dimon, Chairman and Chief Executive Officer of JPMorgan Chase, “and bring more certainty for our respective shareholders, clients, and the marketplace. We look forward to a prompt closing and being able to operate as one company.”
The purchase of the 95 million shares, which has been approved by both companies’ Board of Directors, is expected to be completed on or near April 8.
“Our Board of Directors believes that the amended terms provide both significantly greater value to our shareholders, many of whom are Bear Stearns employees, and enhanced coverage and certainty for our customers, counterparties, and lenders,” said Alan Schwartz, President and Chief Executive Officer of Bear Stearns.
“The substantial share issuance to JPMorgan Chase was a necessary condition to obtain the full set of amended terms, which in turn, were essential to maintaining Bear Stearns’ financial stability.”
The $30 billion in special financing coming from the Federal Reserve Bank of New York’s has also been amended so that Chase will realize the first $1 billion in losses associated with Bear Stearns assets being financed and the Fed will fund the remaining $29 billion.
Shares of Bear Stearns were up a whopping $6.83, or 114.59%, to $12.79 in midday trading on Wall Street, revealing that investors still value the company above the new offer.
The stock had been trading just under six dollars in a prior trading session, but still stands far below its value of roughly $80 per share less than a month ago.