Bear deal could spark more capital raises - analyst

lunes 17 de marzo de 2008 05:35 CET

NEW YORK, March 17 (Reuters) - The Bear Stearns BSC.N deal could spark off a new round of capital raises from investment banks, de-leveraging of balance sheets, and additional strategic combinations or acquisitions, Bank of America analyst Michael Hecht wrote in a research note.

Bear Stearns struck a deal on Sunday, under which JPMorgan (JPM.N: Cotización) will take it over paying just $2 a share.

Hecht wrote he could justify a valuation for Bear of more than $40 per share.

"This suggests to us this deal had little to do with maximizing shareholder value for (Bear Stearns) shareholders and more with stemming a potential financial crisis and the cascade effect that could ensue given the breadth of counterparties that Bear's businesses touch day to day in the global financial markets," he wrote in a note dated Sunday.

Hecht added that "if a firm as large as Bear Stearns can be taken down on exaggerated claims about liquidity and counterparty risk which snow-balled into a market reality as investors, counterparties and lenders shot first and asked questions later, then what's to stop another pureplay "monoline" broker/dealer from facing similar issues?"

The financial model of all investment-banks seems called into question at this juncture, he concluded.

Hecht's note said he still had a 12-month price target on the shares of $92 but that was "under review as we examine the implications of this transaction". (Reporting by Megan Davies; Editing by Tomasz Janowski)