Major shareholders oppose Bear Stearns takeover by JPMorgan Chase
20 March 2008
Mumbai: When the news broke on 16 March that JPMorgan Chase would acquire Bear Stearns for a fraction of its value of even a week back, many lamented the demise of one of the oldest and most venerated names on Wall Street. Now comes the news that this takeover may be opposed by the very people who stand to lose the most if the deal goes through – Bear Stearn's largest shareholders who had paid top dollar for their stock only to see the price plummeting, and now faced with selling their shares to the acquirer bank at a paltry $2.32 each at yesterday's closing price, as per the all-stock deal proposed by JP Morgan Chase.
The formidable list of opponents include John Dorfman from the largest corporate shareholder Thunderstorm Capital, as well as the two largest individual shareholders, billionaire investor Joseph Lewis and Bear Stearns former chief executive officer James Cayne. As reported earlier, (See: Bear troubles and fears), all of them stand to lose billions if the JPMorgan Chase deal is closed.
Joseph Lewis had paid an average of $103.89 apiece for his 12.14 million Bear Stearns shares, and stands to lose as much as $1.19 billion on his investment. This takeover could potentially halve his net worth, estimated by Forbes magazine to be $2.5 billion in 2007 survey. James Cayne had once been the richest CEO in Wall Street, and his stake in the firm had approached $1 billion last year when the stock reached its peak price of $171.51. Now, his shares are worth a mere $31 million. Effectively, he has been downgraded from billionaire status after the crisis broke.
Both men are trying their utmost to secure funding for the beleaguered bank, and have talked to private-equity firms like Kohlberg Kravis Roberts Co. and JC Flowers & Co. as well as banks like HSBC, RBS and Credit Suisse for a possible better offer.
Bear Stearns has traded at a premium to the JPMorgan buyout price since the deal was announced, as traders bet that resistance from shareholders would force a higher offer. Seems that such speculation has come true, but as to how long these investors can hold out against a takeover that has the Federal Reserve's support is anybody's guess. Analyst aren't very optimistic about a possible contender to Bear Stearns emerging in the near future, but feel that this resistance may help it get a better price from JPMorgan Chase.