(July 25) – “Let the bidding begin for the last freestanding properties on Wall Street,” writes Patrick McGeehan in today’s New York Times.
“In the wake of the UBS agreement this month to buy the PaineWebber Group for $12 billion, executives of the few remaining independent financial services firms are worrying about being left alone at the dance. Yesterday, shares of the Bear Stearns Companies leaped 7.7 percent, to their highest level in almost two years, on an analyst’s report that the firm might be for sale.”
“Bear Stearns officials have not publicly announced an interest in selling the firm, and the analyst’s report, which was published yesterday, said no deal appeared to be imminent. Neither James Cayne, the firm’s chief executive, nor the author of the report, Guy Moszkowski, an analyst at Salomon Smith Barney, responded to phone messages.”
“Still, some traders and investors bought shares on the hope that the management of Bear Stearns would be willing to listen to offers. The firm’s shares rose $3.6875, to $50, on the New York Stock Exchange. More than three million shares changed hands, about five times normal daily volume.”
” ‘We think that it’s a very cheap stock apart from whether there’s a deal or not,’ said Larry Sondike, a portfolio manager with the Mutual Series funds in Short Hills, N.J. ‘We think we’re getting the possibility of consolidation for free.’ ”
“Mr. Sondike would not say whether the Mutual Series funds, formerly run by the activist investor Michael Price, had put any pressure on Bear Stearns management to improve returns on the firm’s lagging stock. ‘I trust that Bear Stearns management and board will do what’s right for all Bear Stearns shareholders,’ he said.”
“In the report that set the fire under shares of Bear Stearns yesterday, Mr. Moszkowski broached the subject of a buyout, saying that Mr. Cayne seemed more receptive than ever to the idea. But he added that Mr. Cayne had thrown out a minimum purchase price of four times the firm’s book value, the value of its assets minus liabilities.”
“That amounts to about $120 a share, or about $19 billion, for a firm whose stock had not traded above $50 in almost two years. UBS snapped up PaineWebber for 3.5 times book value, and some boutique investment banks have sold for steeper prices.”
“But some analysts said they doubted that Bear Stearns would command a premium like those even from a foreign bank seeking an instant presence on Wall Street.”