Commentary - 03/24/2008

JP Morgan Chase Vs Bear Stearns [Updated: 19:30 CST]

So now comes the bargaining over just how many dollars it will placate (read Shut Up) Bear Stearns investors.
JPMorgan Raises Bear Stearns Bid to Woo Shareholders
JPMorgan Woos Bear Stearns Insiders as Lewis Dissents
Joseph Lewis reports 8.35% stake in Bear Stearns
JPMorgan Chase & Co. quadrupled its offer for Bear Stearns Cos. to $10 a share and struck a deal to buy 39.5 percent of the company without a shareholder vote, making it unlikely opponents can block the takeover.
. . .
Bear Stearns will issue 95 million new shares without seeking a shareholder vote by taking advantage of an exemption from NYSE rules governing share sales, the banks said. The exchange requires companies to give notice when they act under the exemption.
[I didn't know they could get away with that, so I guess that washes out my theory below.] 19:30 CST
. . .
(Joseph) Lewis and James ``Jimmy'' Cayne, Bear Stearns's 74-year-old former chief executive officer, were trying to recruit investors to counter JPMorgan's offer, the New York Post reported last week, citing people familiar with the situation. Cayne, who remains non-executive chairman of the company, is among the directors who have agreed to vote their own shares in favor of the amended sale agreement, according to the companies' statement.
I don't blame the employees nor the non-bank shareholders for being upset. It's easy to understand folks' emotions when they've just lost their life-savings. But what are these folks up against? Note Joseph Lewis's 8.35% stake versus all the other Major Holders of Bear Stearns who are already Major Holders in JP Morgan Chase! If you take the time to click around the tables below, you'll soon realize just how tight those interconnections are between various Major Shareholders. In fact, if you just look at the tables without the company name, how could you even tell which company is which?

So let's see how fast we can come up with 39.5% of Bear Stearns that would be willing to sell out so quickly. First, as you can see below, what I call Barclays and Associates already control 31.81%, and that is only the TOP 10 Major Holders and TOP 10 Funds. Both FMR (Fidelity) and Vanguard have large stakes in JP Morgan Chase, so that would easily add another 4.67%, making 36.48%. There's Barrow & Hanley, who has 9.73%. It turns out that they also have significant holdings in JP Morgan Chase, but since they are the 22nd largest holder, they don't show up on the TOP 10. Just their shares alone would bring the total to 46.21%. So 39.5% is being conservative.

Now even if those firms in the above paragraph did not consider selling out, there are a whole lot of shares in the main list that are associated with, and have more at risk, with JP Morgan Chase than Bear Stearns. One last thing about these figures, and that is they are as of 31-Dec-07. In other words, this was all planned out way before the March event. They always are.

How could you even tell which financial institution will be attacked next?
Maybe this is why: Sometimes The Dragon Wins

Symbol Name Of Corporation

JPMorgan Chase & Co (As of 31-Dec-2007)
Top 10 Institutional HoldersShares2007Value2006
AXA (Paris, France)162,403,2304.83%$7,088,900,989-.--%
Barclays Global Investors UK Holdings Ltd150,034,4754.47%$6,549,004,833-.--%
State Street Corporation123,254,2063.67%$5,380,046,091-.--%
Vanguard Group, Inc. (The)100,641,6663.00%$4,393,008,720-.--%
FMR LLC (Fidelity)89,333,4812.66%$3,899,406,445-.--%
Capital Research And Management Company74,443,9012.22%$3,411,019,543-.--%
Davis Selected Advisers, LP73,675,3802.19%$3,215,930,337-.--%
Capital Research Global Investors66,839,9011.99%$2,917,561,678-.--%
Bank of New York Mellon Corporation57,802,6121.72%$2,523,084,013-.--%
Goldman Sachs Group Inc46,848,3411.39%$2,044,930,084-.--%
% of Shares Held by All Insider and 5% Owners:1%-.--%
Top 10 [0.7%] of 1317 Institutional Holders Control28.14%-.--%
Percentage of Barclays and "Associates" Control11.25%-.--%
NOTE: Vanguard manages four funds that control 2.87%.
Capital Research manages a fund that controls 1.99%.
Davis Selected Advisers manages a fund that controls 0.99%.
Washington Mutual manages a fund that controls 0.91%.
Barclays manages a fund that controls 0.59%.
Legg-Mason manages a fund that controls 0.53%.
Therefore, the TOP 10 Major Holders control 36.02%, and
Barclays/Associates controls 13.28% of JP Morgan Chase.
Capital Group controls 6.20%.

Symbol Name Of Corporation

The Bear Stearns Companies, Inc. (As of 31-Dec-2007)
Top 10 Institutional HoldersShares2007Value2006
Barrow, Hanley Mewhinney & Strauss, Inc.11,485,0589.73%$1,013,556,368-.--%
Morgan Stanley6,335,7295.37%$559,128,084-.--%
Legg Mason Capital Management, Inc.5,721,0104.84%$504,879,132-.--%
Private Capital Management, Inc.5,541,2594.69%$489,016,106-.--%
Barclays Global Investors UK Holdings Ltd4,245,4513.60%$374,661,050-.--%
State Street Corporation3,550,7153.01%$313,350,598-.--%
Vanguard Group, Inc. (The)3,149,6912.67%$277,960,230-.--%
Janus Capital Management, LLC2,765,6992.34%$244,072,936-.--%
FMR LLC (Fidelity)2,359,0112.00%$208,182,720-.--%
Putnam Investment Management, LLC2,242,9801.90%$197,942,985-.--%
% of Shares Held by All Insider and 5% Owners:39%-.--%
Top 10 [2.3%] of 420 Institutional Holders Control40.15%-.--%
Percentage of Barclays and "Associates" Control25.75%-.--%
NOTE: Vanguard manages three funds that control 8.60%.
Putnam manages three funds that control 3.44%.
Legg Mason manages a fund that controls 1.35%.
Janus manages a fund that controls 1.27%.
Therefore, the TOP 10 Major Holders control 54.81%, and
Barclays/Associates control 31.81% of Bear Stearns.

2008 by Edward Ulysses Cate
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