Filed under: Deals, JPMorgan Chase (JPM), Bear Stearns Cos (BSC), Federal Reserve
The Bear Stearns (NYSE: BSC) deal happened fast, nearly overnight. Some analysts think buyer JP Morgan (NYSE: JPM) got a great deal because the Fed is backing nearly $30 billion of Bear Stearns asset values. Within days of an announcement of the buyout, the large bank had 39.5% of BSC shares, a lien on its headquarters, and a very firm deal at $10 a share.
According to The Wall Street Journal: “Indeed, it’s possible a Delaware court could find these features coercive, and depriving shareholders of a true vote.” It is true that Bear’s shareholders didn’t have much time to take into account the idea. The Fed and JP Morgan would argue that there wasn’t time. The brokerage was about to go under.
As is true with most visible deals that involve shareholder rights and employment, Congress may decide that it wants to look at the transaction, as if it didn’t have superior things to do.
The perverse argument here’s that shareholder rights trump the company’s survival. It leads to a conclusion that the holders of Bear Stearns stock should have been able to accept or reject the JP Morgan bid, even if it caused Bear Stearns to go under. In essence, shareholders have the right to lose all of their money, if they wish.
Douglas A. McIntyre is an editor at 247wallst.com.
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