Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Monday, March 24, 2008

JPMorgan-Bear Stearns Merger May be Renegotiated

The New York Times reports that JPMorgan Chase is negotiating to increase its offer for Bear Stearns stock to $10, up from the $2 agreed upon last weekend, as unhappy Bear Stearns shareholders threaten to vote down the merger agreement.  The Fed, however, is resisting any increase, since Treasury Secretary Paulson has emphasized that the government's involvement was necessary to provide stability to the marketplace, and paying the Bear Stearns shareholders any more would make the merger look more like a bailout of the firm and its shareholders.  The Bear Stearns board reportedly is also considering selling a block of stock to JPMorgan Chase to reduce the percentage of Bear Stearns shares needed to approve the merger.

Because of the haste in which the merger was negotiated, the document may contain drafting errors.  One provision commits JPMorgan Chase to guarantee Bear Stearns trades even if the shareholders vote down the deal.  NYTimes, JPMorgan in Negotiations to Raise Bear Stearns Bid.

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