JPMorgan Chase completed the first stage of its planned acquisition of Bear Stearns Tuesday by gaining a 39.5 percent stake in its beleaguered rival.
JPMorgan purchased 95 million newly issued shares of Bear Stearns common stock, or 39.5 percent of the company, in exchange for about 20.7 million shares of JPMorgan common stock.
Jin Lee
Bear Stearns
Gaining the 39.5 percent stake gives JPMorgan a greater chance of winning shareholder approval for its planned $1.7 billion takeover of Bear Stearns.
The deal, which was struck as Bear Stearns faced a cash crunch and the possibility of imminent collapse, requires majority approval by Bear Stearns stockholders.
Two Michigan pension funds had previously had filed a lawsuit seeking emergency court action to stop the takeover from moving forward, according to court papers.
The funds had asked the Delaware Chancery Court for a temporary restraining order blocking the sale of the minority stake to JPMorgan.
A decision had not been made as of Tuesday morning, according to the judge's office.
Last week, Vice Chancellor Donald Parsons said at a hearing that the Delaware court was "very well aware of the importance for expedition ...
but also well aware of the importance of the merits of the case." Parsons had said he planned to issue a written ruling on the matter in the next several days, but he did not set a specific date.
The plaintiffs, the Police and Fire Retirement System of the City of Detroit and the Wayne County Employees' Retirement System, are Bear Stearns shareholders.
The funds said Bear Stearns' directors violated their fiduciary duties in agreeing to the JPMorgan deal and should be forced to look for higher offers.
Lawyers for the pension funds said that JPMorgan's $10-a-share revised offer for the company -- up from $2 a share initially -- was "grossly inadequate." In the court papers, the funds' lawyers said that the deal provisions also effectively block any potential third-party bidder from making an offer.