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JP Morgan 'ups Bear Stearns bid' JP Morgan raises Bear Stearns bid
(about 2 hours later)
JP Morgan Chase is in talks to raise its offer for Bear Stearns, according to a report in the US. JP Morgan Chase has raised its offer for Bear Stearns to $10 a share, a hefty increase from the original offer of $2 a share.
The New York Times says that JP Morgan is willing to offer $10 (£5) a share, a hefty increase on the original $2 a share offer made on 16 March. In addition it is buying 95 million newly issued Bear Stearns shares.
A raised offer might calm shareholders who feel that Bear Stearns was sold at a bargain price. The original offer angered many Bear shareholders who considered it too cheap.
The new deal values Bear Stearns at $1.19bn, still a fraction of its value before confidence in the bank collapsed and clients started to withdraw funds.
But analysts say there will still be doubts, despite the sweetened offer.
"Clearly this increases the chance the deal goes through, but there are still going to be employees and shareholders unhappy with $10 a share," said James Ellman, Portfolio Manager at Seacliff Capital in San Francisco.
JP Morgan Chase also agreed to change the guarantees its receiving from the US Federal Reserve.
The investment bank will now take on the first $1bn of any Bear Stearns' losses and the Fed will fund remaining $29bn.
JP Morgan Chase expects the deal to be completed by April 8th.
The raised offer might calm shareholders who feel that Bear Stearns was sold at a bargain price.
Bear Stearns, a victim of the credit crunch, was sold as confidence in the bank fell and clients withdraw funds.Bear Stearns, a victim of the credit crunch, was sold as confidence in the bank fell and clients withdraw funds.
The bank got into trouble when other banks refused to lend it money over fears that it had too many bad debts due to the sub-prime mortgage crisis. The bank got into trouble when other banks refused to lend it money over fears that it had too many bad debts due to the sub-prime mortgage crisis. Clients were worried about Bear Stearns exposure to investments in assets backed by US mortgages.
Clients were worried about Bear Stearns exposure to investments in assets backed by US mortgages. It is reported that the Fed is reluctant to agree to a raised offer as it does not want to appear to be bailing out Bear Stearns shareholders.
JP Morgan Chase made its offer with the backing of the US Federal Reserve which is guaranteeing $30bn of Bear Stearns assets.
The New York Times says that the Fed is reluctant to agree to a raised offer as it does not want to appear to be bailing out Bear Stearns shareholders.
Many of those shareholders have seen their investment decimated.Many of those shareholders have seen their investment decimated.
Among them is said to be British investor, Joe Lewis, who reportedly invested more than $1bn in Bear Stearns stock.
Last week he said he would take whatever action was needed to protect his investment.
According to the report JP Morgan Chase hopes that an improved offer will encourage investors like Mr Lewis not to take legal action.