JP Morgan Chase's attempted takeover of ailing Bear Stearns could be foiled by two pension schemes which yesterday revealed they were considering court action that could block progress of the takeover.
Amid the uncertainty Bear Stearns shares struggled to stay above the $10 level JP Morgan offered in a revised bid on Monday.
The move was widely seen as an attempt to avoid litigation by shareholders whose stakes were worth $160 a year ago until a rash of redemptions two weeks ago forced the bank to seek help from the government and one of its biggest rivals.
Bear Stearns stock yesterday closed down 4.2% at $10.78, while JP Morgan Chase was down 1.2% at $45.99.
The Bear Stearns price is in stark contrast to its corporate merchandise, whose value is blossoming. A used T-shirt bearing the Bear Stearns logo has sold for $151.76 online, worth about 15 shares in the once-venerable Wall Street investment bank.
Items including umbrellas, coffee mugs, cafeteria cards, hard hats and a pewter reproduction of Bear Stearns' Manhattan office building, have also been offered up to bidders.
But it is still uncertain whether JP Morgan will get its hands on the bank.
Two Michigan-based pension funds are "weighing whether it is appropriate to seek a temporary restraining order" on the purchase plans ahead of a shareholder vote on the buyout, said Gregory Nespole, a lawyer for the Police and Fire Retirement System of the City of Detroit.
The new arrangement in place as part of the increased bid allows JP Morgan to buy 95 million new Bear shares, or a 39.5% stake, giving the bank 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 over the proposed JPMorgan buyout in a lawsuit seeking an injunction blocking the deal and damages for shareholders if it does close.
Nespole said the fund is coordinating efforts with another pension plan, the Wayne County Employees' Retirement System, which filed a separate lawsuit on Monday.
Nespole said that the pension funds that brought the litigation are still unhappy with the revised deal terms.
"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," he said.
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