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Bear investors may seek a better deal

March 20, 2008|From Times Wire Services

Bear Stearns Cos. shareholders may hope that another suitor will emerge to challenge JPMorgan Chase & Co., but their best hope may be prying a few extra dollars from JPMorgan.

Billionaire investor Joseph Lewis, who owns about 8% of Bear's shares, said in a regulatory filing Wednesday that he was prepared to "take whatever action . . . necessary and appropriate to protect the value" of his stake in the company. Such moves could include talking to Bear Stearns or other parties about options for the investment bank, the filing says.

"People are fantasizing," Keith Wirtz, president and chief investment officer at Fifth Third Asset Management, said of investors who had bid the price of Bear Stearns shares substantially above the $2.32-a-share, or $340-million, value of JPMorgan's offer.

But if enough shareholders vote to commit to vote against the deal, they may have leverage over JPMorgan, especially because rivals are trying to grab Bear Stearns employees and customers.

"If I were JPMorgan, I'd pay an extra dollar a share just to get the deal done in a reasonable period of time," said Gordon Marchand, portfolio manager at Sustainable Growth Advisers in Stamford, Conn.

In fact, some of the firm's 550 brokers who handle individual investors' accounts are said to be receiving job offers from competitors promising packages of $2 million or more, with most of it paid upfront.

Bear Stearns shares closed Wednesday at $5.26, more than double the value of JPMorgan's offer. Still, that was down 11%. JPMorgan rose $1.03 to $43.74.

JPMorgan agreed Sunday to buy Bear Stearns for stock now valued at $340 million.

The transaction was encouraged by the Federal Reserve, which feared that if Bear, facing a liquidity squeeze, went out of business, the entire financial system could be shaken.

Shareholder advisory firm RiskMetrics Group Inc. said in a note to clients this week that Bear investors may be in what is popularly known as the first stage of grief -- denial -- which could be followed by anger, bargaining, depression and finally acceptance.

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