Investors bet on rival Bear bids

By Ben White and Francesco Guerrera in New York
Published: March 18 2008 21:09 Last updated: March 18 2008 23:28
Investors on Tuesday increased their bets that other bidders would emerge for Bear Stearns or that JPMorgan Chase would be forced to improve its offer, driving shares in the beleaguered investment bank to nearly three times the price at which JPMorgan agreed to take it over.
Investors were betting that opposition from some shareholders, such as Joseph Lewis, the UK-born billionaire whose stake in Bear is believed to be about 9 per cent, and some of Bear’s employees – who own about a third of the shares – could force the takeover price to be raised. JPMorgan agreed to pay $2 a share but Bear’s stock closed on Tuesday at $5.91, up 23 per cent, after trading as high as $8.50 during the day.
If the JPMorgan offer goes through, Bear’s shareholders will suffer huge losses on the value of their investments. Mr Lewis’s stake, for example, is believed to be more than $1bn below its value last year. Jimmy Cayne, Bear’s chairman and former chief executive, has also taken big paper losses on his holding.
Tavistock, Mr Lewis’s investment vehicle, declined to comment but people familiar with Mr Lewis’s thinking said he con-sidered JPMorgan’s offer derisory and would oppose it when Bear’s shareholders voted on the deal in the next two months.
The people familiar with Mr Lewis denied press reports that the billionaire was looking for other bidders, saying he thought JPMorgan would end up buying Bear but that he would agitate for a higher price.
JPMorgan executives have expressed confidence that the deal would be approved. They argue that there are few other buyers able to take on the firm’s $300bn balance sheet and persuade the Federal Reserve to extend the $30bn credit line to fund Bear’s illiquid assets that JPMorgan secured during frantic negotiations at the weekend.
Under the terms of the deal, if Bear’s board recommended an-other offer, the company would have to issue 20 per cent of its share capital to JPMorgan at $2 a share, which would give JPMorgan a big say in a rival takeover.
JPMorgan has also won an agreement to buy Bear’s Madison Avenue building for $1.1bn, even if the deal falls through.