This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bear Trapped: Alternative to Deal Unlikely

Updated from 4:05 p.m. EDT

Expecting a white knight for Bear Stearns (BSC)? Don't hold your breath.

The vise-grip of JPMorgan Chase's (JPM) buyout offer that Bear's shareholders find themselves ensnared by is not likely to loosen. The deal has a 98% chance of being wrapped in the coming weeks and months speculated a high-level executive at Bear, who spoke to under condition of anonymity.

The executive notes that there is a number of competing factions that have varying interests making the outcome of the deal still in doubt, but the official held out little hope that JPMorgan's bear hug is not permanent. Conference calls to discuss Bear's options have taken precedence over the day-to-day investment banking business that made the 85-year-old firm a storied franchise, the source says.

On the heels of sinking as low as $2.84 after JPMorgan's $2-a-share offer Monday, Bear's stock spiked as much as 200% Tuesday but more recently was trading at $5.21.

Reports suggest that Bear bondholders have been purchasing stock in the fixed-income centered investment shop in order to vote in favor of the deal and receive the backing of JPMorgan, while other parties are piling in with the hope that they can nix the offer or push for a juiced price.

While it's unlikely that another suitor such as HSBC (HBC) or private equity shop Kohlberg Kravis Roberts will swoop in, as the New York Post has reported, it's almost certain that a sweetened offer from JPMorgan, led by CEO Jamie Dimon, will be put on the table, the source says.

The rationale for increasing the deal is that Dimon wants to appease angered investor groups and employees and score approval for the deal, rather than see it stalled in protracted talks. Bear's headquarters alone are said to be worth approximately $8 share and the Federal Reserve is posting a $30 billion backstop against mortgage securities held in Bear's Level 3 bucket, where many hard-to-value securities have been placed. So increasing the price comes at little risk to JPMorgan, the official notes.

Calls to Bear and JPMorgan spokesmen were not returned.

Bear's well-heeled executives, including former CEO Jimmy Cayne and current CEO Alan Schwartz, as well as rank-and-file investors, are facing billions in losses. For many, the losses mean the evaporation of retirement nest eggs and college tuition savings for their children.

The stunning and swift deterioration in Bear Stearns' financial health, which teetered on bankruptcy, blindsided many Bear staffers, who could never have imagined they'd wakeup on Monday to a buyout offer that values a company once worth $20 billion at about $240 million. Just last Friday, Bear was worth $5.7 billion.

Moments after the deal was consummated, JPMorgan executives reached out to a handful of top-flight talent at Bear in an attempt to placate concerns about job security.

The possibility that the JPMorgan buyout might be set asunder or another suitor might emerge is a remote one. But what makes the prospect that much more daunting is the multitude of clauses -- widely reported and confirmed by the source -- and provisions that would see JPMorgan walking away like bandits.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs