Mumbai:
Major banks, including J P Morgan Chase, Bank of America and HSBC are likely to
enter the race to acquire investment firm Bear Stearns Cos, although analysts
said there would be real obstacles to a deal happening anytime soon. Bear
Stearns, the fifth largest Wall Street broker dealer by market value, which is
scrambling to deal with losses of $1.7 billion at two of its hedge funds last
month, has been cited as a potential take-over target. And,
while Bear Stearns'' leading edge in mortgage trading became a liability as the
subprime home loan market suffered from big delinquencies, the brokerage''s top
two executives were competing in a week-long national bridge tournament. Bear
Stearns''s co-president, Warren Spector, and the chief executive, Jimmy Cayne,
however, were in touch with events at the company by phone. Bear
Sttearn''s two troubled hedge funds were victims of a collapse in US high-risk
subprime mortgage market - and investors took fright, fearing Bear Stearns''s exposure
could be more. This
prompted Standard & Poor''s to put Bear Stearns on a "negative" credit
outlook. As its shares plummeted, the $15 billion bank convened a conference to
assure investors that it remained solvent. Analysts
said while HSBC, Bank of America and Wachovia Corp might be interested in Bear
Stearns'', J P Morgan Chase & Co might be looking at its global clearing business,
which includes one of the top-ranked prime brokerage businesses in the US. J
P Morgan is much smaller in the prime brokerage business - financing and clearing
trades for hedge funds - than many of its peers and acquisiton of Bear Stearns''
could boost its business, said an analyst. Bank
of America might also be interested in bolstering its investment banking operations,
which are less robust than Citigroup''s or J P Morgan Chase''s, said an investor. HSBC,
however, is also wrestling with its own exposure to the US subprime market. The
bank took a charge for bad debts of $6.35 billion in the first half of the year,
up 63 per cent. Bear
Stearns, however, is unlikely to sell itself when its shares are at such a low,
and there are few obvious buyers that would be a perfect cultural or business
fit, analysts said. While
Bear''s subprime exposure may keep most suitors away until more clarity emerges
about the full cost of Bear''s exposure to subprime mortgages, the Wall Street
Journal said Bear Stearns has spoken to China-based investors about buying an
equity stake or setting up a joint venture.
|