New York: US financial services major JP Morgan Chase has agreed to buy beleaguered investment bank Bear Stearns for a mere $2 a share which is about a tenth of its closing price on Friday.
JP Morgan Chase would pay about $270 million in stocks in the face of Bear’s huge losses on investments linked mortgages.
The government regulators have approved the deal which would help to stem the plummeting confidence in financial companies having an adverse effect on the economy.
In January 2007, Bear’s share had traded at $170 but fell sharply as mortgage crisis gripped the market and closed at $30 share at New York Stock Exchange on Friday after it was forced to seek emergency funding because of the cash crunch.
JP Morgan said the deal would be effective immediately and guarantee the trading obligation of Bear Stearns and its subsidiaries alongwith providing management oversight.
The transaction would be a stock-for-stock exchange and JP Morgan would exchange 0.05473 shares of JP Morgan Chase common stock per share of Bear Stearns stocks.
Based on the closing prices on 15 March, the transaction would have a value of $2 a share.
There are no conditions attached to the deal and it is expected to be approved by the share holders by the end of second quarter of this year.
The Federal Reserve, the Office of the Comptroller of the Currency (OCC), and other federal agencies have given all necessary approvals.