Thursday, March 20, 2008

Bear Stearns (NYSE:BSC): Increased Conviction in $2 Price - MSCO

- Morgan Stanley is out with a call on Bear Stearns (NYSE:BSC) saying their conviction level that the $2 purchase price for BSC goes through has increased. They believe JPM has negotiated a strong deal, and has well thought out protections in place. Additionally, the merger agreement and an appendix with further information is expected to be out in the next few days.

Multiple Shareholder Votes Possible:

In the event that the deal is not approved at the first shareholder vote, Bear has the obligation to bring the matter back to shareholders continuously for a period of up to one year from the original acquisition date of March 16, 2008.

Fed Non-Recourse Assets: The Fed is buying up to $30B of the most risky assets from Bear and is taking the credit risk. Any new buyer would need to renegotiate with the Fed.

JPM Has Options: As protection in the event of a competing bid, JPM has the right to purchase of Bear’s headquarters. Additionally, the Wall St Journal is reporting that JPM has the option to
purchase up to 19.9% of BSC at $2/share.

Low Probability of Other Potential Buyers: At this stage MSCO sees low probability of a competing bid emerging.

Potential Risk: If the markets rally enough to entice someone else to bid even without the Fed guarantee. Since the effective pricing of the deal, on March 14, the AAA ABX is up between 1-3%.

Notablecalls: Not making a short call on BSC here...although tempted. Especially with the stock up this AM on chatter Lewis & co are talking to PE firms.

1 comment:

Vermont Trader said...

I don't think you can borrow BSC at the moment.