Bear Stearns Died Today. Is Lehman Next?
Over the weekend, JP Morgan announced an agreement to acquire Bear Stearns in a $2/share fire sale. The deal has been approved by both companies’ boards and it values Bear at just $236 million, compared to the $3.5 billion valuation Bear had at the close of market on Friday and $20 billion valuation they had in January.
Effective immediately, J.P. Morgan Chase is guaranteeing the trading obligations of Bear Stearns and its subsidiaries and is providing management oversight for its operations. The deal isn’t subject to any conditions, except shareholder approval. It is expected to close before the end of the second quarter.
The article also talks about JP Morgan mainly being interested in Bear’s prime brokerage business that caters to hedge funds. It wouldn’t surprise me if they sold off the rest of Bear’s remaining viable businesses.
UPDATE: I just noticed this tidbit in the same Wall Street Journal article:
Meanwhile, worries are deepening that other securities firms and commercial banks might be on shaky ground. Lehman Brothers Holdings Inc. Chief Executive Richard Fuld, concerned about the markets and possible fallout from Bear Stearns’s troubles, cut short a trip to India and returned home Sunday, ahead of schedule, according to people familiar with the matter. The decision came after a series of calls Saturday to both senior executives at the firm and Treasury Secretary Henry Paulson, these people say.
Is Lehman next?
Damon said,
March 17, 2008 at 9:15 am
This is crazy. Look at some of the top fundholders in this. Names like Legg Mason Value Trust, Vanguard Windsor, etc. No one saw this come coming.
The thing that baffles me right now is that the stock is trading around $4/share. Double the buyout offer?? Apparently the market thinks it’s worth more than the pittance that JP Morgan is offering. I’d dare to say that the Bear Stearn’s execs bonuses in December were probably more than they just liquidated the company for…. It’s an amazing loss of wealth.