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| Version 5 | Version 6 |
|---|---|
| JP Morgan raises Bear Stearns bid | JP Morgan raises Bear Stearns bid |
| (about 5 hours later) | |
| JP Morgan Chase has raised its offer for Bear Stearns to $10 a share, from the original offer of $2 a share. | JP Morgan Chase has raised its offer for Bear Stearns to $10 a share, from the original offer of $2 a share. |
| Under the deal, JP Morgan Chase is also buying 95 million newly issued Bear Stearns shares, or 39.5% of the bank. | Under the deal, JP Morgan Chase is also buying 95 million newly issued Bear Stearns shares, or 39.5% of the bank. |
| The initial offer angered many Bear shareholders who thought the company was being sold at a bargain price. | The initial offer angered many Bear shareholders who thought the company was being sold at a bargain price. |
| Including the new shares, the latest offer values Bear Stearns at around $2.1bn, still a fraction of its value before the near collapse 10 days ago. | Including the new shares, the latest offer values Bear Stearns at around $2.1bn, still a fraction of its value before the near collapse 10 days ago. |
| Purchasing the extra shares puts JP Morgan Chase in a much stronger position to push through the takeover. | Purchasing the extra shares puts JP Morgan Chase in a much stronger position to push through the takeover. |
| 'Increased chance' | 'Increased chance' |
| The price of Bear Stearns shares almost doubled. They closed at $11.25, up $5.29. JP Morgan Chase ended up 1.2% at $46.55. | |
| 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 it is 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. |
| Credit crunch | 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. 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. | 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. |