May 29, 2008: Bear Stearns Cos. shareholders
approve the company's $10 per share sale to J.P. Morgan Chase & Co. The vote was more of a formality than anything else and ends a months-long, unprecedented story. The Wall Street Journal did a three-piece series on the saga, and The Deal's Robert Teitelman
weighed in with his thoughts on the coverage and the
story of the fall of Bear itself.
Continue reading below
THIS YEAR'S STORY
The 85-year history of Bear Stearns was transformed in what seemed to be a blink of an eye. The New York-based investment bank announced it would sell out to J.P. Morgan for $236 million, or $2 per share (eventually bumped to $10) on March 16, after negotiations that reportedly started two days earlier.
The sale amount -- at $2 and at $10 still -- was a pittance of what Bear was valued at a year before, when the stock was trading at $170 per share before the subprime mortgage crisis and the credit meltdown. The unimaginable acquisition was expedited by the Federal Reserve, which agreed to fund nearly $30 billion of Bear's less liquid assets for J.P. Morgan. Some experts deemed the development a bailout or simply a fire sale. The takeover "was a gift from God," Laura Davis Jones, a Wilmington-based partner at restructuring specialists Pachulski Stang Ziehl & Jones, told The Deal. The consequences of Bear going bankrupt would have been catastrophic for economies and markets around the world. At the same time, shareholders of Bear, including the employees holding 30% of the firm, were left with a tiny fraction of what the bank was once worth.
THE END IS IN SIGHT
Days after the shareholder vote, Bear Stearns Merchant Banking, the private equity arm of Bear Stearns with an enviable track record, said it would officially spin off as a wholly independent entity. The news the firm would move headquarters and change its name was a mere formality as it had been operating largely independently of Bear even before the fire sale to J.P. Morgan.
And the May 29 shareholder vote came the day after two busted Bear Stearns hedge funds lost their appeal for protection under the Bankruptcy Code and capped months of commentary and analysis.
- Earlier in May, Teitelman twice offered a few thoughts on Wall Street accountability in light of Bear Stearns.
- For Corporate Dealmaker's Ken Klee, the fall of Bear Stearns and the role therein of its former CEO Jimmy Cayne, recalled an old Elvis Costello song.
- Lazard vice chairman Gary Parr discussed what exactly happened at The Deal's 2008 PC Symposium earlier in the spring.
- Peppercom's Gene Colter analyzed the lesson of the Bear bailout, and why moral hazard is here to stay.
LAYOFFS, COUNTERBIDS AND REGULATORY IMPLICATIONS
The onslaught of Bear layoffs began in early May. In mid-April, it seemed J.P. Morgan might offer Bear CEO Alan Schwartz the chance to stay on, but that he might not accept an offer until the bank's 14,000 employees knew whether they would still have jobs. While Cayne, who dumped his Bear shares the day after J.P. Morgan boosted its offer price, was largely faulted, Blodget, however, blamed Schwartz for Bear's fall. A ruling came down in late March that Bear executives had to give 90 days notice before leaving their posts. Dimon himself asked rivals not to poach Bear employees. Some turned to Facebook and some turned to eBay Inc. in hopes of making a quick buck selling Bear merchandise.
In mid-April, rumors that JC Flowers & Co. had bid for Bear Stearns turned out to be true.
The Deal's Washington team covered the regulatory implications, examining the dreams of a super regulator, the SEC's role in the fall and the now-open window. Congress' Baucus and Grassley had to get their say in, as well.
THE SHAREHOLDER SQUEEZE
As Bear Stearns shareholder outrage mounted over J.P. Morgan's $2 per share offer, the banking giant increased its offer to $10 per share, or 0.21753 a share. (Some, understandably, still wanted more.) Additionally, the new terms, according to a statement, said J.P. Morgan would guarantee the first $1 billion of those illiquid assets while the Federal Reserve will be responsible for the remaining $29 billion. Bear shareholders on May 7 dropped a request for a preliminary injunction to block the deal and planned instead to sue for damages. - Gerald Magpily and Carolyn Murphy
THE DEAL'S COVERAGE:
Bear Stearns Merchant Banking officially declares independence
The WSJ concludes the Bear saga: What about that $2 a share?
Cayne bids adieu to Bear Stearns at holders meeting
Blame it on Cayne: The prescience of Elvis Costello
Bear Stearns loses Ch. 15 appeal
The WSJ Bear saga, part two: Schwartz, Dimon and the Fed
Private Capital Symposium Video: Gary Parr on Bear Stearns
Soapbox: Bear's moral
Wall Street accountability: Further thoughts on Bear
Why the machers at Bear won't get their just desserts
Bear Stearns shareholders drop restraining order
Bear Stearns layoffs begin
Integration details on J.P. Morgan Chase-Bear Stearns
Don't Grassley, Baucus have SEC sources?
Bear Stearns: May the Schwartz be with J.P. Morgan?
JC Flowers bid for Bear
Still angry? Vent at Bearsucks.com
Blodget blames Schwartz, not Cayne, for Bear's collapse
Baucus, Grassley seeking Bear Stearns attention
Judge: Bear Stearns execs have to give 90 days notice
Media Maneuvers: Bear skin
Cayne dumps Bear shares
Bear Stearns lawsuits: Who are these guys anyway?
Bear Stearns shareholders file suit
Dimon asks rivals not to poach Bear employees
Bear Stearns employees turn to Facebook
Bear Stearns gets S&P ratings boost
Bear Stearns merchandise floods eBay
Bear Stearns shareholders want more
How much is J.P. Morgan really willing to pay for Bear Stearns?
Deal Diary: J.P. Morgan-Bear Stearns advisers
Bear Stearns Merchant Banking: Bloodied, not destroyed
Signs of a bottom?
The ins and outs of the Fed's open window
Risk arb update: J.P. Morgan-Bear Stearns
Citic scraps Bear Stearns deal
Did Dimon get a Bear in the rough?
A 'Bear' sentiment wrinkle for LBOs
Bear Stearns: Ch. 11 never an option
Bear's litigation picture
Dodd backs Bear deal
J.P. Morgan to buy Bear Stearns
The Deal's Robert Teitelman assesses J.P. Morgan/Bear Stearns deal
Bear Stearns Merchant Banking's John Howard comments on firm's future
Bear Stearns: 'We're still in business'
The other Bear Stearns: M&A adviser
Bear amends bylaws with legal fees in mind
Two views of Alan Schwartz's future
Bear Stearns lawsuits start rolling in
What now for Bear Stearns' PE, VC affiliates?
Dartmouth Professor on Subprime meltdown and Bear Stearns
J.P. Morgan still has investment-grade credit
J.P. Morgan to offer Bear bankers incentive
Alan Schwartz: Wall Street's persona non grata?
Late-night levity in light of Bear Stearns
Skepticism abounds on Lehman's future
Message boards light up as Bear Stearns' shares rise
Bear Stearns lawsuits start rolling in
Earnings confirm 'Lehman is not Bear'
Bear Stearns' impact on IPOs
Feds open likely to draw regulatory scrutiny
Bear Stearns Merchant Banking weighing options
Report: Bear's No .2 shareholder seeks to block sale
Did J.P. Morgan's Dimon get a Bear in the rough?
East Side Holdings is first to sue Bear Stearns
What now for Bear Stearns' PE, VC affiliates?
Bear Stearns Bump: How markets are treating other institutions
J.P. Morgan still has investment grade credit
Dartmouth professor on subprime meltdown and Bear Stearns
For Bear Stearns, Ritchie bankruptcy filing is worth watching
Markets in 'Bearish' mood as H&R Block, Weyerhaeuser do deals
Bear Stearns' Cayne abridged weekend
J.P. Morgan-Bear advisers - Just added Skadden names
Bear, Lehman shares pounded early
Bear Stearns deal heightens Lehman jitters
Market reactions to Bear Stearns, J.P. Morgan deal
Bear investors left holding pennies
J.P. Morgan, Bear Stearns conference call recap
J.P. Morgan buys Bear for $2 per share
| Chronology of the breakdown of Bear |
The Date |
The Action |
| 3.24.2008 |
J.P. Morgan makes higher offer of approximately $10 per share for Bear |
| 3.19.2008 |
The future of Bear Stearns private equity arm is uncertain |
| 3.18.2008 |
Citic Securities abandoned plans to invest in Bear, which is traded well above its $2 per share sale price |
| 3.16.2008 |
J.P. Morgan reached agreement to acquire Bear |
| 3.14.2008 |
J.P. Morgan with support of Fed offered emergency financing to Bear. Stock closes at $30.86 |
| 3.12.2008 |
Bear CEO Alan Schwartz made appearance on CNBC reassuring investors of liquidity. Stock falls to $61.58 |
| 1.08.2008 |
Investment banker Alan Schwartz replaced CEO James Cayne |
| 12.20.2007 |
Bear Stearns said its write-downs related to subprime mortgages grew to $1.9 billion -- almost 60% more than the $1.2 billion announced in early November |
| 10.22.2007 |
Bear, Citic Securities Co. Ltd. reach agreement, later scrapped, to invest in each other |
| 3.12.2007 |
Two Bear funds appeal Ch. 15 denial |
| 8.05.2007 |
Warren Spector resigned, under pressure for his handling of the subprime mortgage mess, as co-president and co-chief operating officer of Bear |
| 6.14.2007 |
Bear reported for the first time in four quarters that earnings declined |
Source: The Deal, Reuters l |
