JPMorgan Chase significantly sweetened the pie today as it aggressively moved to lock up its acquisition of Bear Stearns and head off legal challenges at prices which are still some 70% below what Bear Stearns was trading at only two weeks earlier.
The new bid is at $10/share, five times the $2/share offer tendered only seven days earlier, which is geared to soften the blow to existing Bear Stearns’ shareholders. The new or amended filings include:
1) An Amendment to the JPMorgan Chase Bear Stearns Merger Agreement, which includes important termination provisions, an option on the Bear Stearns’ headquarters property, refinements to operations of certain deal collateral, and the termination of an option agreement from last week whereby JPMorgan could have acquired 20 million shares of Bear Stearns’ stock for $2/share.
2) A Share Exchange Agreement, enabling JPMorgan to acquire 95 million shares of newly issued Bear Stearns common stock at the current price equivalent of $10/share, giving JPMorgan 39.5% of Bear Stearns for $10/share. Effectively, when combined with the holdings of Bear Stearns’ Board, it gives JPMorgan close to 43% of the potentially outstanding share of Bear Stearns’, very close to the majority approval required from shareholders. This is a similar functionality, but a different mechanism, than the top up provisions I’ve discussed previously.
3) Revisions to the Guaranty Agreement, thereby providing greater viability to the ongoing operations of Bear Stearns. This effectively helps preserve the value in the going concern of Bear Stearns for JPMorgan.
You can access these documents via the SEC filings of JPMorgan or Bear Stearns. If you want to be able to search across thousands of these types of documents (Merger Agreements and Guaranty Agreements), I suggest searching at www.RealDealDocs.com.
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