Biz people

Dimon gets a nice bargain

Jamie Dimon's grab of Bear Stearns may turn into one of the biggest bargains in recent years.

Banking experts were almost unanimous in their appraisal of the move by JPMorgan Chase & Co, which is run by Dimon, to buy Wall Street rival Bear Stearns Cos Inc.

"It's my opinion that this represents a great bargain for JPMorgan," said Samuel Hayes, emeritus professor of finance at Harvard Business School.

"Bear Stearns was, until this year, one of the smartest and most profitable investment banks in the world," said Hayes. "This could be a real money-spinner for JPMorgan."

Brad Hintz, an analyst with Sanford Bernstein, estimated that a breakup of Bear Stearns would fetch $7.7 billion. "This is a tremendous bargain for JPMorgan shareholders," he said in a note.

The deal will cost JPMorgan more than just stock. The bank is setting aside $6 billion to cover deal-related costs such as litigation and severance, putting the total cost much higher.

"Even with an estimated $6 billion of transaction costs, the deal economics look very compelling," said Citibank analyst Keith Horowitz.

"From a strategic perspective JPMorgan is getting several business lines from Bear that are very complementary to its investment bank," Horowitz said in a note to clients.

Dimon (below left), JPMorgan's chairman and chief executive, has developed a reputation as a turnaround specialist since bouncing back from being ousted from Citigroup Inc a decade ago.

He'll need those skills to integrate cash-strapped Bear Stearns into JPMorgan's financial empire, which includes car loans, credit cards, and investment banking.

"Dimon negotiated well," Morgan Stanley analyst Betsy Graseck said in a note, but added that the deal "does not come without risk."

UBS chief Ospel to take pay cut

UBS AG cut Chairman Marcel Ospel's pay by 90 percent after Europe's largest bank by assets reported the biggest ever loss by a bank.

Ospel (above) earned 2.57 million Swiss francs ($2.62 million) last year, Zurich-based UBS said in its annual report published yesterday on its website.

Ospel, who had turned down a bonus for 2007, has come under pressure from investors after $19 billion in writedowns tied to the collapse of the US subprime market. UBS earlier this year proposed to shorten his term to one year from three.

The bank reiterated that it expects 2008 to be "another difficult year".

(China Daily 03/19/2008 page16)