Two U.S. pension funds have asked a Delaware court for an emergency order to stall JPMorgan Chase from moving forward with its takeover of Bear Stearns, a plaintiff's lawyer said on Tuesday.
JPMorgan has agreed to buy 95 million newly issued Bear shares, or a 39.5 percent stake. It is widely seen as giving JPMorgan a virtual lock on the proposed buyout, which requires majority shareholder approval. JPMorgan has said it hopes to acquire the newly issued shares by April 8.
The Detroit fund last week sued Bear Stearns in Delaware Chancery Court over the proposed JPMorgan buyout in a lawsuit seeking an injunction blocking the deal and damages for shareholders if it does close.
Since then, JPMorgan has raised its bid to $10 a share, up from $2 a share initially. But that's still nowhere near Bear's stock price of more than $170 a share last year.
"At this juncture, based on the public record and based on the company's stock price, which continues to trade at a premium ... the $10-a-share figure remains inadequate," said Nespole, of law firm Wolf Haldenstein Adler Freeman & Herz LLP.
Nespole said the fund is coordinating efforts with another pension plan, the Wayne County Employees' Retirement System, which filed a separate lawsuit on Monday over the merger.
A temporary restraining order, if granted, could block the issuance of the new Bear Stearns shares while the shareholders press their legal challenges to the deal.
But legal experts have said deal challengers likely would face a tough time persuading a Delaware judge to set aside the buyout. Investors, experts say, would have to argue that the Bear Stearns board failed in its fiduciary duties to all shareholders in agreeing to the takeover, a deal that was reached as the company faced imminent collapse and was brokered with the help of the U.S. government.
Since the deal was unveiled earlier this month, Bear Stearns shareholders have been busy calling their lawyers to investigate an array of possible legal claims. At least one federal securities fraud lawsuit was filed last week, contending that Bear Stearns misled investors by allegedly hiding its true financial condition from the public.