Sunday, March 16, 2008

JP Morgan Buys Bear Stearns

JP Morgan bought Bear Stearns for $2 a share.  Bear Stearns stock closed at $30 on March 14.  So JP Morgan gets a nice discount.
Bear Stearns's sale to JPMorgan caps an eight-month slide in the company's fortunes that began last July with the collapse of two of its hedge funds. Those failures sparked a wider market concern that called into doubt the value of any asset linked to the mortgage market, Bear Stearns's biggest business.
Without a resolution this weekend, the situation would probably have continued to deteriorate when markets resumed trading tomorrow, according to analysts and investors including Cambiar Investors LLC's Brian Barish.

Bear Stearns's profit exceeded $2 billion in 2006, yet the price JPMorgan is paying is about one quarter the value of the securities firm's headquarters building in midtown Manhattan. The 1.2 million-square-foot, 45-story structure built in 2001 is worth about $1.2 billion, based on the average $1,000 per- square-foot that comparable office space in the city is currently fetching.

``If you're buying equity for free and the liabilities are pretty well capped, it sounds like it's good for JPMorgan shareholders,'' said Ben Wallace, who helps manage $800 million, including shares of JPMorgan, at Grimes & Co. in Westborough, Massachusetts. ``The thing that everybody's been worried about has been the counterparty risk and if this gives people more confidence, that will be good for the markets.''
Seems like a great bargain for JP Morgan. 

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