Official Presentation: JP Morgan Acquiring Bear Stearns

From Seeking Alpha.
John Carney blogs the call.
DealBook has a handy Q&A. Here’s a good question:

Can Bear’s shareholders stop it?
Absolutely. There will be a shareholder vote and Bear’s shareholders can vote no. But there appears to be a unique provision in the merger agreement that Bear is required to re-hold the vote over the course of 12 months if Bear’s shareholders vote no the first time. Only after twelve months of meetings and no votes can the transaction be definitively rejected. A bit shaky under Delaware law, but given the circumstances, I find it hard to see how the Delaware courts would refuse to enforce it.
If, after 12 months, there is still a no vote it appears that the JPMorgan and Fed guarantees go away. Talk about a pill to swallow. This would likely leave shareholders with the only alternative to try and seek back money through the bankruptcy process. But the bankruptcy process is unlikely to be fruitful even though Bear has a building worth about a billion dollars. And of course, the delay may find Bear in an improved position such that the acquisition no longer makes sense.
It all sets up some interesting arbitrage opportunities. Perhaps Bear has negotiated a better deal than the market thinks – negotiating itself a year to shop for a higher offer.
And Bear will still have the option to accept a higher bid if someone chooses to make it. Here, I note the irony that Kohlberg Kravis Roberts was reportedly part of the other bidder group looking at Bear this weekend. K.K.R. started at Bear Stearns and in 1976 the management there rejected a proposal by the trio to start a separate buyout unit within the investment bank. The trio then went out to start K.K.R. In hindsight, yet another bad decision.
Of course, the more interesting question is whether Bear should have held out a few more days for some form of contingent consideration instead of settling for $2 by threatening the Federal Reserve with a Chapter 11 and its systemic ramifications. Perhaps we will find an answer on Monday if Bear does indeed trade over the $2 price.
But I do know one thing. If I were Alliance Data Systems, I would announce early tomorrow morning the long-expected termination of my deal to be acquired by the Blackstone Group. No one will care.

Posted by on March 17th, 2008 at 8:06 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.