M&A: Stern opposition to Bear sale

Rumours are circulating that a number of challenges are in the offing to head off the sale of investment bank Bear Stearns. In the US, a fund manager, Legg Mason, is said to be preparing to sue Bear's management on allegations that they failed to properly manage the company and to secure the best price for the company which is currently slated to be transferred to JP Morgan Chase for a little more than USD230 million, a price we described as "bargain basement" when the deal was announced (see Economics: Bear Stearns sale - trend or glitch?)

And in the UK, a multimillionaire, Joe Lewis, says that the company lost more than GBP500 million of his money as a shareholder.

The JP Morgan Chase deal is for an astonishing six percent of Bear's market capitalisation on the day before the deal was announced.

One US law firm specialising in class actions says that more than three dozen shareholders have approached the firm to investigate the deal and to take action to force the directors to look for a better offer to reduce their losses - and another firm says it has had more than 300 make enquiries about possible action. Some 30% of the company's stock is owned by employees who are not only seeing their nest eggs reduced to close to zero but also expecting substantial job losses. They, too, are thought to be planning to try to prevent the takeover.

Some shareholders will argue that they bought shares whilst the bank was in dire straits but the bank had failed to inform the markets as to the extent of its troubles, so misleading the market by maintaining a false impression of health.