NEW YORK (Reuters) – Bear Stearns Cos Inc Chairman James Cayne apologized to employees and investors on Thursday for the demise of the 85-year-old investment bank, as shareholders voted to sell the company to JPMorgan Chase & Co for less than $10 a share.
In a five-minute meeting at Bear's Manhattan headquarters, Cayne expressed regret and said a market “hurricane” brought down the bank, according to those in attendance.
The press was excluded from the session, which attracted about 400 shareholders, many of them employees whose personal wealth was gutted by the collapse of Bear's stock price.
“I personally apologize,” Cayne said, according to shareholders who attended the meeting. “Words can't describe the feelings that I feel.”
Cayne, speaking publicly for the first time since the firm's collapse, surprised many in the audience with his remarks. Several shareholders said Cayne, who is 74, appeared thin and drawn.
“He said he was sorry for what happened, but he also didn't apologize for his actions … He said they ran into a hurricane,” said Arthur Ulrich, a elderly man who lost $3,000 on his Bear stock. Ulrich said Cayne looked “rather disheveled.”
JPMorgan after the meeting said the $1.5 billion acquisition of Bear would be completed on Friday. It said the deal was approved by 84 percent of the shares that were voted on Thursday.
Under the deal, Bear stockholders will receive 0.21753 share of JPMorgan stock for each Bear share. Based on Wednesday's closing price, the deal values Bear at $9.32 a share.
JPMorgan shares were up 87 cents, or about 2 percent, to $43.74 in afternoon trading on Thursday.
Bear employees and shareholders, who saw the price of their shares plummet from a record high of $173 in January 2007 and $55 as recently in March, essentially were strong-armed into choosing between a token fire-sale offer and bankruptcy.
Approval was all but guaranteed, since JPMorgan struck a deal with Bear in March that let it amass more than 49 percent of Bear's shares in exchange for raising its bid to $10 a share from $2 and revising the term of a loan guarantee agreement.
In mid-March, Bear, weakened by exposure to mortgage securities and the collapse of two mortgage hedge funds, was slammed by speculation that it was struggling. That sparked a run on the bank, and Bear was soon running out of cash.
It was forced to seek a bailout from the Federal Reserve through JPMorgan. Before the weekend of March 15-16 was over, Bear was resigned to accepting a takeover offer of $2 a share from JPMorgan, which was backed by the Fed.
The Federal Reserve Bank of New York said on Thursday that its previously announced purchase of $30 billion of Bear assets would be completed around June 26. Previously, the transaction — aimed at reducing JPMorgan's exposure to distressed Bear assets — was to be completed when the merger was closed.
“The additional time will help ensure the smooth transfer of this large portfolio,” JPMorgan said.
Attendees at Bear's Thursday meeting described a muted event marked by regret and frustration. No one posed questions or expressed anger to Cayne or Chief Executive Alan Schwartz, who together during the past six months presided over the bank's demise.
“It's a sad day, but we'll get through it,” Schwartz said in brief remarks, according to attendees who spoke to Reuters.
Nearly 8,000 of Bear's 14,000 employees have lost their jobs; Schwartz is expected to be offered a post as a senior deal maker at JPMorgan.
SORRY NOT ENOUGH
Bear's executives did not take responsibility for the events that first weakened and then led to the collapse of the firm.
Cayne said press reports criticizing his behavior before and during Bear's collapse were inaccurate.
“Don't believe what you read in the press. It isn't even close,” Cayne said. He expressed admiration for Bear's employees and concluded, “The bottom line is that life goes on.”
Cayne realized more than $76 million from selling his Bear shares. He sold some in December 2007 at $89 per share, and the rest on March 25 at $10.84 per share, cashing out his holdings in the bank, according to regulatory filings.
Many Bear employees were quietly seething about the bank's collapse, which wiped out the savings of many bankers and traders who had been urged to keep their bonuses invested in Bear stock.
Employees declined to give their names because they are not authorized to speak publicly about the bank and feared their employment or severance agreements would be jeopardized.
“There's a lot of angry people here,” Raymond said.
Wayne Kaniper, a shareholder and veteran who fought in Korea, said Cayne “offered his apologies, but to me that's not enough.”
Pointing inside Bear's lobby, he said, “They should be ashamed to fly the American flag”
By Joseph A. Giannone
(Writing by Dan Wilchins; Editing by Andre Grenon and John Wallace)