JPMorgan Chase (JPM: 36.54, -1.57, -4.11%) has agreed to purchase the beleaguered Wall Street icon Bear Stearns (BSC: 30.00, -27.00, -47.36%) in a $236 million deal that values Bear’s shares at $2.
That is a massive discount to Bear’s closing price of $30 a share Friday, and brings a quick and painful end to the 85-year-old Wall Street investment bank.
JPMorgan will exchange 0.5473 of its shares for one share of Bear Stearns. It values Bear at just $236 million, compared to Bear’s Friday market capitalization of $3.54 billion.
The deal is expected to close in the next 90 days, and is subject only to shareholder approval, which both banks expect to happen.
"JPMorgan Chase stands behind Bear Stearns," said JPMorgan Chief Executive Jamie Dimon in a press release Sunday. "Bear Stearns' clients and counterparties should feel secure that JPMorgan is guaranteeing Bear Stearns' counterparty risk."
Bear's shares traded at more than $150 less than a year ago. The deal places Bear's stock at a 93% discount to Friday's close.
If it had gone down much more I was going to buy it.
Bear basically suffered a run on the bank, similar to what put many banks out of business during the Depression. The customers and investors lost confidence in the old firm. The Feds acted quickly and put this deal together, and I understand they are providing some special financing as well. They need to act quickly to put out the fire, and they did.
It may still be a rough day on Wall Street today, but probably not as bad as it might have been had this deal not come together.
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