Bear Stearns sale to JPMorgan Chase set for vote May 29
NEW YORK—Bear Stearns Cos. shareholders are scheduled to vote on the proposed acquisition of the investment bank by JPMorgan Chase & Co. on May 29, according to a regulatory filing.
If the vote on the sale fails, Bear Stearns said in the filing it will likely have to cut "significant numbers" of staff, would not ensure those fired would receive severance packages and could possibly have to file for bankruptcy.
A shareholder lawsuit trying to stop JPMorgan Chase from voting the minority stake in Bear Stearns it acquired in early April has been withdrawn, according to filings made with the Securities and Exchange Commission on Thursday.
Current shareholders will continue with lawsuits trying to stop the acquisition from being completed and are seeking unspecified damages, according to the filing.
In early April, JPMorgan acquired a minority stake in Bear Stearns as part of a plan to eventually acquire the entire company. JPMorgan was issued 95 million shares of Bear Stearns common stock last month -- a move that limited the chances the vote on the deal could fail.
In March, JPMorgan originally agreed to acquire Bear Stearns for $2 per share, but increased the price to $10 per share in an effort to alleviate shareholder unrest.
JPMorgan stepped in to buy the ailing investment bank with the support of the Federal Reserve in an effort to avoid a potentially catastrophic collapse of Bear Stearns.
Just prior the announcement of the acquisition, Bear Stearns' liquidity all but disappeared in a matter of days as investors, creditors and customers started withdrawing funds because of worries about the bank's solvency.
Bear Stearns was among the hardest hit banks by the collapse of the subprime mortgage market and ensuing problems in broader credit markets. Subprime mortgages are loans given to customers with poor credit history.
Two hedge funds managed by Bear Stearns, which were heavily invested in subprime mortgage debt, failed in the middle of 2007, helping to spark the breakdown in global credit markets.
As defaults among mortgages have increased, the value of bonds backed by the troubled loans has plummeted, forcing banks to reduce the value of their holdings and take billions of dollars in charges.
