JPMorgan Raises Bear Stearns Offer

Updated from 11:34 a.m. EDT

JPMorgan Chase(JPM - Cramer's Take - Stockpickr) quadrupled its buyout agreement for the sunken investment bank Bear Stearns (BSC - Cramer's Take - Stockpickr) after an investor outcry over the previous fire-sale price.

The company said Monday that the new deal calls for each share of Bear Stearns to be exchanged for 0.21753 shares of JPMorgan stock. On the basis of JPMorgan's closing price on Thursday, the deal values Bear Stearns at $10 a share.

Last week, JPMorgan signed an emergency deal to buy Bear Stearns for 0.05473 share, equal to roughly $2 a share at the time. The rapidly signed agreement came after investors began pulling money out of Bear Stearns amid fears of a liquidity crisis, creating a cash crunch at the bank that would have sent it into bankruptcy absent a buyout.

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The deal infuriated Bear investors, many of whom are company employees.

Bear shares had been much higher than its deal price last week, in anticipation of a new buyout agreement. The stock soared nearly 89% Monday to $11.25 after the new agreement was announced.

JPMorgan shares also climbed, further lifting the deal's value. The stock was up 1.3% to $46.55.

"We believe the amended terms are fair to all sides and reflect the value and risks of the Bear Stearns franchise," said Jamie Dimon, JPMorgan's chairman and CEO, "and bring more certainty for our respective shareholders, clients and the marketplace. We look forward to a prompt closing and being able to operate as one company."

JPMorgan also will purchase 95 million newly issued shares of Bear Stearns common stock, or 39.5% of the outstanding common stock, after giving effect to the issuance, at the same roughly $10-a-share price.

"The substantial share issuance to JPMorgan Chase was a necessary condition to obtain the full set of amended terms, which in turn, were essential to maintaining Bear Stearns' financial stability," said Bear Stearns President and CEO Alan Schwartz.

The new deal also calls for the Federal Reserve -- which helped broker the original deal by agreeing to provide as much as $30 billion in financing -- to take on slightly less risk. The transaction has also been amended so that JPMorgan will bear the first $1 billion of any losses associated with the Bear Stearns assets being financed and the Fed will fund the remaining $29 billion on a non-recourse basis to JPMorgan.

The sweetened deal also sent other financial stocks climbing. Washington Mutual (WM - Cramer's Take - Stockpickr) surged 11.5% to $13.04, while Citigroup (C - Cramer's Take - Stockpickr) climbed 6% to $23.86. Merrill Lynch (MER - Cramer's Take - Stockpickr) advanced 3.7% to $48.58, and Wachovia (WB - Cramer's Take - Stockpickr) climbed 2.9% to $31.59.