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Published September 25, 2008 at 11:18 PM
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J.P. Morgan Chase & Co. made the highest bid in a shotgun auction of the banking assets of Washington Mutual Inc. by the Federal Deposit Insurance Corp., winning them with a $1.9 billion offer. Highlights from the J.P. Morgan conference call on the deal include:
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- J.P. Morgan Chase is paying $1.9 billion to the FDIC for the assets and the transaction closed immediately.
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In addition to the purchase J.P. Morgan is raising $8 billion through an offering of its common stock to the public.
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J.P. Morgan is acquiring "the bank branches and assets, not the holding
company," giving it all of the deposits and certain liabilities of
Washington Mutual's banks.
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Included in the purchased assets are mortgage assets, which J.P. Morgan
said it valued at $176 billion. Those assets will be immediately
written down by 19%, or $30.7 billion.
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Left on behind are the assets and liabilities of the holding company,
including unsecured senior debt and subordinated debt amounting to
roughly $20 billion.
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The transaction is expected to generate $12 billion over the next three
years. The Washington Mutual banking operations should be immediately
accretive to earnings and add more than 50 cents per share in 2009.
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The deal leaves J.P. Morgan Chase with over 5410 branches and $911
billion in deposits. It expects to realize cost savings of $1.5
billion. Less than 10% of combined branches are expected to be closed.
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In its own business J.P. Morgan expects $3 billion - $3.5 billion in markdowns on mortgage and leveraged loans.
- George White
See Dealscape post on J.P. Morgan purchaseSee Crisis on Wall Street Dealwatch
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