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JP Morgan raises Bear Stearns bid JP Morgan raises Bear Stearns bid
(10 minutes later)
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.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.
In addition it is buying 95 million newly issued Bear Stearns shares. In addition it is buying 95 million newly issued Bear Stearns shares - equivalent to 39.5% of the company.
The original offer angered many Bear shareholders who considered it too cheap. The original offer angered many Bear shareholders who thought 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.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.
'Increased chance'
But analysts say there will still be doubts, despite the sweetened offer.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."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. JP Morgan Chase also agreed to change the guarantees it is 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.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. Credit crunch
The raised offer might calm shareholders who feel that Bear Stearns was sold at a bargain price.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. Clients were worried about Bear Stearns exposure to investments in assets backed by US mortgages. 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.
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. Clients were worried about Bear Stearns exposure to investments in assets backed by US mortgages.
It had been reported that the Fed was reluctant to agree to a raised offer as it did 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.