JPMorgan Using Bonuses to Keep Bear Stearns Staff
JPMorgan Chase is offering bankers at Bear Stearns bonuses to stay and support the controversial takeover, a person familiar with the situation said Thursday.
The development comes quickly on the heels of news that British billionaire Joseph Lewis plans to take action to protect the value of his 8.4 percent stake in Bear Stearns, according to regulatory filing Wednesday.
JPMorgan Chief Executive Jamie Dimon met with hundreds of Bear Stearns executives late Wednesday -- his first meeting with the bank's employees since the takeover was agreed to on Sunday, Reuters reported.
At the meeting, Dimon proposed incentives to Bear Stearns employees retained by JPMorgan . Those employees who stay at the close of the deal would receive a bonus that will include JPMorgan shares, said the person, who was briefed on the meeting.
But it's unclear whether Bear Stearns employees, who own about 30 percent of the firm, were swayed by the offer.
"There's more questions than answers at this point," said another person familiar with the workings at Bear Stearns.
Spokespeople for JPMorgan and Bear Stearns declined to comment.
Faced with a sudden cash crunch that threatened its collapse, Bear Stearns agreed to an all-stock offer from JPMorgan, which values the storied investment bank at about $285 million -- a week ago it was valued at more than $7 billion.
The fire sale offer of about $2.41 a share at current market prices shocked Bear Stearns employees, who saw much of their savings evaporate.
As part of the deal, JPMorgan secured special Fed financing for $30 billion of Bear Stearns' less liquid assets. The agreement also includes an option that gives JPMorgan the right to buy Bear Stearns' valuable Manhattan headquarters, even if the deal is voted down by shareholders.
The transaction, which is seen as leaving little room for a counter offer, is viewed as a plum deal for JPMorgan, analysts have said. JPMorgan's shares have risen over 20 percent since its Friday close.
'Whatever Action That They Deem Necessary'
Meanwhile, in a Securities and Exchange Commission filing Wednesday, Joseph Lewis reported holding 12.1 million shares of the New York-based investment bank. He holds the stake through Aquarian Investments, Cambria Inc., Nivon Inc. and other entities.
Nivon bought more than 500,000 Bear Stearns shares on March 13 for $55.13 apiece, just days before Bear Stearns agreed to be acquired for $2 per share.
Lewis said the shareholder group will take "whatever action that they deem necessary and appropriate to protect the value of their investment in the shares," including encouraging Bear Stearns and third parties to consider an alternative transaction.
Bear Stearns was forced to accept the deal after risky bets on securities tied to subprime mortgages pushed the bank to the brink of collapse.
Lewis, a magnate who controls more than 170 companies, first reported taking a 7 percent Bear Stearns stake in September. The investment made him one of the company's largest shareholders.