Why in the world would JP Morgan pay more for Bear Sterns!?
They could've bought the stock for $2 per share - why would they raise the bid to $10!?
Best Answer
150 points
tlune answered one year ago …
I agree with the reasons given above, and would add the following:
If Bear Stearns had known the Fed was going to open the discount window to investment banks on Sunday night, they probably would not have signed this deal in the first place. This move by the Fed has made it highly unlikely that any other major investment banks will fail, and it probably would have saved Bear Stearns had it been done before they signed this deal with JP Morgan. Dimon is just trying to salvage the deal at some more reasonable price at this point.
Answers
106 points
darose answered one year ago …
<quote>
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 British billionaire financier Joe Lewis, the firm’s largest shareholder, who had invested $1.26 billion in Bear over the last year at an average price of about $104, said in a filing with the Securities and Exchange Commission that he would seek to block the deal by taking “whatever action†necessary and would “encourage†the firm and “third parties to consider other strategic transactions.â€
</quote>
http://www.nytimes.com/2008/03/24/business/24deal.html
1130 points
sundarkambam answered one year ago …
1. JP Morgan wants to avoid the costly lawsuits it would be facing from various investors and the total price still comes to $1 Billion... Small change. What does JP Morgan gets out of this ...
a. Access to Bear Stern's Brokerage and clearing operations which are very valuable.
b. Bear's new Madison Avenue office which is itself worth more than $1 Billion.
2. Also JP Morgan's friend ... the US Fed is guaranteeing $30 Billion worth of bad assets.
So even if the price is $2 Billion tomorrow, it is a great bargain for JP Morgan.
