Dollars and Jens
Sunday, March 16, 2008
J P Morgan to Acquire Bear Sterns?
This just came across the wire:
Bear Stearns Cos. was closing in on a deal Sunday afternoon to sell itself to J.P. Morgan Chase & Co., as worries deepened that the financial crisis of confidence could spread if Bear failed to find a buyer by Monday morning.I don't know what Bear Sterns looks like internally right now, but I suspect this is more than their shareholders would get without an acquisition, and is either a very good or a very bad deal for JPM.
People familiar with the discussions said all sides were pushing hard to complete an agreement before financial markets in Asia open for Monday trading. "None of these things is done until they're done," Treasury Department spokeswoman Michele Davis said Sunday afternoon. "But I think everyone's expectation is sometime in the early evening hopefully" the deal will be done.
While terms of the deal were still being hammered out Sunday afternoon, Bear Stearns could fetch roughly $2.2 billion, or slightly less than $20 a share, said people familiar with the talks. Reflecting the dire situation at Bear, that valuation is one-third lower than the company's stock price of $30 in New York Stock Exchange composite trading Friday at 4 p.m. Last year, the shares hit $170.
I suppose I'm not really adding value here.
UPDATE: It's interesting how price can color one's impression of the value (especially when it's about all one knows) - at $20/share, I figured it could be either a good deal or a bad deal. But at $2 per share, as recent reports suggest, I suspect Morgan is doing a favor for Hank Paulson, paying more than zero for something worth less than zero. Unless Morgan already has counter-party liability.
I should probably mention at some point that I own shares of JPM.
UPDATE 2: Greg Mankiw seems to know more than I do, low hurdle that that is.