JPMorgan Chase & Co. has announced it is acquiring The Bear Stearns Companies Inc.
The boards of directors of both companies have unanimously approved the transaction.
The transaction will be a stock-for-stock exchange.
JPMorgan Chase will exchange 0.05473 shares of JPMorgan Chase common stock per one share of Bear Stearns stock.
Based on the closing price of March 15, 2008, the transaction would have a value of approximately $2 per share.
Effective immediately, JPMorgan Chase is guaranteeing the trading obligations of Bear Stearns and its subsidiaries and is providing management oversight for its operations.
Other than shareholder approval, the closing is not subject to any material conditions. The transaction is expected to have an expedited close by the end of the calendar second quarter 2008. The Federal Reserve, the Office of the Comptroller of the Currency (OCC) and other federal agencies have given all necessary approvals.
In addition to the financing the Federal Reserve ordinarily provides through its Discount Window, the Fed will provide special financing in connection with this transaction. The Fed has agreed to fund up to $30 billion of Bear Stearns’ less liquid assets.
“JPMorgan Chase stands behind Bear Stearns,” comments Jamie Dimon, chairman and chief executive officer, JPMorgan Chase. “Bear Stearns’ clients and counterparties should feel secure that JPMorgan is guaranteeing Bear Stearns’ counterparty risk. We welcome its clients, counterparties and employees to our firm, and are glad to be its partner.”
Dimon adds, “This transaction will provide good long-term value for JPMorgan Chase shareholders. The acquisition meets our key criteria: We are taking reasonable risk, we have built in an appropriate margin for error, it strengthens our business, and we have a clear ability to execute.”
“The past week has been an incredibly difficult time for Bear Stearns. This transaction represents the best outcome for all of our constituencies based upon the current circumstances,” notes Alan Schwartz, president and chief executive officer, Bear Stearns.
The transaction is expected to be accretive to JPMorgan Chase’s annual earnings.
“Acquiring Bear Stearns enables us to obtain an attractive set of businesses,” remarks Bill Winters, co-CEO of JPMorgan Investment Bank. “After conducting due diligence, we are comfortable with the quality of Bear Stearns’ business,” he adds.