Mar 24, 2008 8:00 am US/Pacific
JPMorgan Raises Offer For Bear To $10 A Share
Fed Backs Play
NEW YORK (AP) ―
The Federal Reserve is backing JPMorgan Chase & Co.'s revamped offer to buy Bear Stearns Cos.
The Federal Reserve Bank of New York said it will provide financing to facilitate the deal.
"This action is being taken by the Federal Reserve with the support of the Treasury Department to bolster market liquidity and promote orderly market functioning," the Federal Reserve Bank of New York said in a statement on Monday.
The Federal Reserve Bank of New York's $30 billion special financing linked to the transaction was changed so that JPMorgan will take on the first $1 billion of any losses suffered by Bear Stearns.
The remaining $29 billion will be available in financing to the company at the Fed's emergency lending rate of 2.5 percent.
The Fed's action came Monday soon after JPMorgan Chase increased its offer for investment bank Bear Stearns to $10 per share, from a bargain-basement price of $2 per share announced last week.
The new offer was aimed at assuaging shareholders of the troubled investment firm and an attempt to quickly move ahead on the takeover.
There was a backlash last week among Bear Stearns shareholders who felt the original deal undervalued Bear Stearns. JPMorgan Chase Chief Executive Jamie Dimon spent most of the week trying to woo Bear Stearns employees, who collectively own about one-third of the company.
The new deal values Bear Stearns at about $1.19 billion - still a fraction of what the company was worth before its sudden near-collapse earlier this month. It also includes a provision for JPMorgan to buy 95 million new Bear Stearns shares immediately, which gives it a 39.5 percent stake in the company before shareholders have even voted.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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