May 30, 2008
Shareholders Approve Bear Stearns Deal
On Thursday, Bear Stearns Company shareholders approved JPMorgan Chase & Co.'s $2.2 billion buyout of the investment bank. The Bank is buying Bear Stearns for approximately $10 per share. the meeting was short and lightly attended.
Commenting on the ten minute meeting at Bear Stearns' Manhattan office, shareholder Hannah Horgan noted,
"They were up there drinking coffee paid with my money ... and we lost our money overnight. I have nothing left, and they were so calm."
So ends with a whimper one of the more dramatic episodes in American financial history. The Fed injects $29 million tax dollars into a deal brokering the sale of an investment bank to keep the bank from defaulting on its short term paper. It is at the outer limit of Fed power and the theory behind what the Fed should do. We are no doubt leaning towards a belief in a "managed economy." The belief empowers fed officials who, whenever faced with claim of "chaos will come if....", will now act to broker solutions with taxpayer dollars.
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The WSJ's recent three-part series into the collapse included what was to me a shocking detail: the direct intervention of Henry Paulson, which caused the original $2 offer. He effectively told JP Morgan to lower their offer in order to reduce moral hazard concerns. Any thoughts?
Posted by: Dave Huestis | May 30, 2008 12:06:00 PM
Business combinations, merger, acquisition, and joint venture are not easy to execute and they most often don’t live up to their expectations. There have been several studies done on mergers and acquisitions announced in the last 20 years and in well over 60% of the cases the synergy was not realized. When synergy doesn’t materialize the acquiring company ends up damaging shareholder value because premiums paid to take a significant equity stake in a target company are not recouped. However, by understanding a company’s motives for buying, selling, or partnering a business, how the decision fits in with their overall corporate strategy, and the careful identification of the characteristics of an ideal target, the chances of success can be greatly increased. effective post merger integration is a big key to success.
Posted by: John Bushelle | Jun 3, 2008 8:21:59 AM