Uncontrollable urges

18 March 2008 By Lauren Silva

Some shareholders are indignant about JPMorgan s $2 a share purchase. But they have little leverage. Bear was rescued from insolvency, and its businesses are already winding down. Potential bidders will be wary of upsetting regulators. JPMorgan holds almost all the cards.

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JPMorgan agreed on March 16 to buy Bear Stearns for approximately $2 a share in stock. According to the merger agreement, JPMorgan can veto certain business decisions as well as the hiring, promotion, or termination of any employee at the vice president level or above. It has the option to buy Bear's New York building for $1.1bn less debt. According to several reports, JPMorgan also has the right to purchase 20% of Bear's shares at approximately $2 each if shareholders vote down the deal, though that part of the agreement has not been made public. There is no termination fee in the deal, which is subject to shareholder approval.

Along with the agreement between Bear and JPMorgan, the Federal Reserve agreed to provide up to $30bn in funding for Bear's "less liquid assets".

On March 18, Bear shares were at $5.91, up over 20% on the day.

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