Bear Stearns (fka BSC)

[jerseyshore]

BEAR HUNTING
FIRM SEEKS WHITE KNIGHT BID TO TOP JPMORGAN
By ZACHERY KOUWE
Click to enlarge
March 19, 2008 -- Secretive billionaire Joseph Lewis and former Bear Stearns chief Jimmy Cayne are quietly searching for a white knight to top the $276 million takeover offer by JPMorgan for the iconic brokerage firm, according to sources familiar with the matter.

However, many Wall Street insiders are calling the duo's efforts nothing more than a pipe dream.

The two friends, each of whom has lost over $1 billion in Bear's collapse, have contacted several private-equity firms, including J.C. Flowers and Kohlberg Kravis Roberts & Co., as well as several overseas banks including Barclays, HSBC, Credit Suisse and Royal Bank of Scotland, sources said.

They hope to persuade a rival bidder to at least make a preliminary offer to buy Bear in order to squeeze more out of JPMorgan chief Jamie Dimon.

Sovereign wealth funds in the Middle East and Chinese bank Citic, which has already examined Bear's businesses and declined to take an earlier stake yesterday, have also been contacted, sources said.

On Monday, Lewis called JPMorgan's offer "derisory."

Despite the efforts, most analysts and investors believe JPMorgan has the upper hand because of several protections built into the deal.

Bear can't accept another offer until its current deal with JPMorgan expires on March 16, 2009, according to the merger document.

Even if a better offer emerges and Bear accepts it, JPMorgan still has the option to buy the firm's Madison Avenue headquarters for $1.1 billion - arguably the most valuable asset that Bear has. That could seriously dissuade rival bidders, analysts said.

JPMorgan also has the option to buy up to 20 percent of Bear right now for $2.34 a share based on yesterday's close of JPMorgan without shareholder approval, something that could make it tougher for any rival to come in with a higher offer.

Another rival bidder would also risk angering the Federal Reserve, which wants to see the JPMorgan deal completed as soon as possible, according to David Trone at Fox Pitt Kelton.

"While there is strong logic behind the theory that another bidder could step up, we believe the practical reality of angering the Fed will ultimately prove preventative," he said.

The unlikely prospect of a rival offer doesn't mean that JPMorgan may not be forced to raise its offer, which now stands at about $2.34 a share.

Cayne and Lewis own roughly 15 percent of Bear's outstanding shares and may persuade shaken employees, who own another 30 percent of the company, to vote down the deal.

Bear's stock rose 23 percent yesterday to $5.91 as some investors hope a rival offer surfaces.

"It's idiotic to believe that the shareholders don't have any leverage here," said one banker. "They could threaten to vote down the deal and put the firm in bankruptcy in order to get more cash out of JPMorgan."

Cayne, who is a member of Bear's board of directors and voted for the JPMorgan deal, could risk further embarrassment if he threatens to vote against the deal, sources said.

Meanwhile, Sen. Chuck Schumer (D-NY) wrote to Dimon yesterday asking for him to sell any redundant businesses to other financial firms in order to save jobs in New York City. Schumer estimates that 8,000 workers could be laid off as a result of the deal.

The same firms that Lewis and Cayne have contacted, are also said to be interested in certain parts of Bear's business.

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http://www.nypost.com/seven/03192008/business/bear_hunting_102536.htm