JPMorgan in Talks to Raise Bear Stearns Bid

NEW YORK (Reuters)- JPMorgan Chase & Co is in talks to raise its takeover offer forBear Stearns Cos to about $10 a share in an effort to appease Bearshareholders angry with the cut-rate deal, a person briefed on thediscussions said on Monday.

But the talks to increase the bid may still fall apart, and the timing of any announcement is uncertain, the source said.

JPMorgan’s original agreement on March 16 to pay $2 per share instock for Bear was widely considered a fire-sale price for the85-year-old Wall Street investment bank. Bear collapsed as largesubprime mortgage losses and falling confidence in the company prompteda run on the bank.

In pre-market electronic trading, Bear shares were up more than 50percent at $9.15 with 50,500 shares changing hands. The stock closedThursday at $5.96 in composite trading.

The original Bear takeover agreement was forged with the support offederal regulators, and the U.S. Federal Reserve is balking at thehigher price, The New York Times said, citing people involved in thetalks.

The newspaper said the Fed originally directed JPMorgan to pay nomore than $2 per share to assure that it would not appear that Bearshareholders were being rescued.

Representatives of Bear and the Fed were not immediately available for comment. JPMorgan declined to comment.

An offer of $10 per share would value Bear at more than $1 billion.That price, however, is less than one-third of the stock’s price onMarch 14, the last trading day before the original deal was announced.It is also less than 10 percent of the stock’s price throughout much of2007.

Jamie Dimon, JPMorgan’s chief executive, grew convinced the mergerwas in jeopardy after spending much of the last week taking calls fromindignant Bear shareholders, The New York Times said, citing peopleinvolved in the talks.

Among these shareholders was the British entrepreneur Joseph Lewis,who spent well over $1 billion on some 12.1 million Bear shares,including some as recently as March 13.

Last week, Lewis said he would take whatever action was needed toprotect his investment, and might encourage Bear and third parties topursue other transactions.

Bear shares closed on Thursday at $6.39, reflecting investorexpectations that JPMorgan might raise its bid or that another suitormight offer a higher price. JPMorgan shares closed at $45.97.

SEEKING SHAREHOLDERS

According to The New York Times, Bear was seeking to authorize thesale of a 39.5 percent stake to JPMorgan on Sunday night, which underDelaware law it can do without shareholder approval. Both companies areincorporated in Delaware.

As part of the original agreement, the Fed extended a $30 billioncredit line to JPMorgan to finance Bear’s most illiquid assets.

JPMorgan was in talks with the Fed Sunday night to assume the first$1 billion of losses on Bear assets before the $30 billion cushionkicks in, the newspaper said.

The original agreement called for JPMorgan to swap 0.05473 of its shares for each Bear share.

(Reporting by Chris Reiter, Joe Giannone and Jonathan Stempel,additional reporting by Anshuman Daga in Singapore; Editing by JeanYoon and John Wallace)