Bear Stearns Shareholders Approve Sale
Friday, May 30, 2008
J.P. Morgan Chase won approval of its purchase of Bear Stearns yesterday, shuttering an 85-year-old firm whose collapse ranks along with Drexel Burnham Lambert as one of the biggest in Wall Street history.
Founded in 1923 by Joseph Bear and Robert Stearns at 100 Broadway in New York, Bear Stearns survived the Great Depression and first sold shares to the public in 1985, under then-chief executive Alan "Ace" Greenberg. Now, the company's brand name will all but vanish, and about 60 percent of Bear Stearns's 14,000 employees are likely to be out of a job.
Bear Stearns shareholders endorsed the sale during a 10-minute meeting yesterday on the second floor of the firm's Madison Avenue headquarters. The gathering was chaired by former chief executive James Cayne, who was replaced by Alan Schwartz in January.
"I personally apologize for what has happened," Cayne, 74, told shareholders, according to a person who attended the meeting. "It's a sad day."
About 84 percent of Bear Stearns's shareholders voted to approve the takeover, J.P. Morgan said. As of May 9, J.P. Morgan held 49.5 percent of the $2.3 billion company, once the fifth-largest U.S. securities firm, Bloomberg data show. The deal is expected to close today.
Separately, the Federal Reserve said yesterday that it would take control of a $30 billion portfolio of Bear Stearns assets on or about June 26, completing an agreement reached with J.P. Morgan chief executive Jamie Dimon two months ago to aid the sale. The central bank hired BlackRock to manage and sell the assets.
Some Bear Stearns employees and shareholders vented their frustration on a portrait of Cayne that an artist placed outside the Bear Stearns building. Comments included: "Dear Jim Up Yours!," "My Blood is Boiling," "Should we raise more capital?" and "Opening Bid: One Dimon."
The deal faces lawsuits from shareholders who sought more than the $10 a share J.P. Morgan agreed to pay in the all-stock deal. They say J.P. Morgan's stake unfairly skewed the vote.
"Cayne offered his apology, but to me that's not enough," said Wayne Kaniper, a shareholder from Trenton, N.J., who said he turned 76 yesterday. He bought his Bear Stearns shares about a year ago. The stock fetched as much as $173 in January 2007.
The sale, announced in March, capped an eight-month slide in the company's fortune that began in July with the collapse of two Bear Stearns hedge funds that invested in securities linked to subprime mortgages. Those failures caused investors to doubt the value of any asset linked to the mortgage market, Bear Stearns's biggest business.
Bear Stearns joins a list of vanished Wall Street names that include First Boston, Salomon Brothers, Dillon Read and Donaldson Lufkin & Jenrette. The one remaining Bear Stearns vestige will be its retail brokerage, which will keep the brand and operate as a unit of J.P. Morgan's asset-management division.
The risk-taking culture that Bear Stearns represented is probably now gone for good, said Charles Geisst, a finance professor at Manhattan College in New York and author of "100 Years of Wall Street."
"Hopefully, the surviving firms will manage their risks better and won't leave it to individual traders," he said. "As they sink into the sunset, as I suspect they will, that model they embody will as well."