Washington - US bank JPMorgan Chase will buy investment firm Bear Stearns for just 2 dollars per share after bailing out the company days earlier, the companies announced Sunday. The 240-million-dollar deal comes after a shortage of cash forced Bear Stearns to seek short-term financing from the Federal Reserve through JPMorgan Chase on Friday after clients pulled 17 billion dollars from Bear Stearns over two days, Bloomberg financial news reported.
The company has been a major holder of bonds backed by risky sub- prime mortgage loans to borrowers with poor credit and the collapse of two of its funds helped spark the collapse of the sector and the economic downturn.
The emergency move sent Bear Stearns shares to their lowest ever on Friday and sparked fears it could go out of business. It lost 47 per cent of its value, or 27 dollars to close at 30 dollars per share.
The deal announced Sunday will be backed by up to 30 billion dollars in financing from the Federal Reserve, which said it had approved the merger. The value of the deal is less than a 10th of the firm's worth last week, Bloomberg said.
"The past week has been an incredibly difficult time for Bear Stearns. This transaction represents the best outcome for all of our constituencies based upon the current circumstances," Alan Schwartz, president and chief executive of Bear Stearns, said in a statement.
Investors will receive 0.05473 shares of JPMorgan Chase stock for every share of Bear Stearns stock under the deal.
Both companies' boards approved the arrangement and it is expected to be completed by the end of the second quarter.
