Legal News

Did Mistakes in the JPM-Bear Contract Help Lead to Renegotiation?

By Dan Slater

M&A lawyering, remunerative though it may be, is a bit of a thankless job. If you do it well, and the deal goes off smoothly, perhaps you get a Lucite deal toy and a seat at the closing dinner, but no one really notices. But the moment there’s an un-dotted i or an un-crossed t, or if negotiations head south, then all eyes are on you: Must be the lawyers’ fault!

According to this morning’s NYT, J.P. Morgan is in negotiations to quintuple its bid for Bear Stearns — from $2 a share to $10 a share. Why the renegotiation? According to the Times, a combination of angry shareholders and mistakes in the contract prompted J.P. Morgan and Bear to consider a new price for the deal, which now is valued at $236 million. Here’s another report from the WSJ.

The story reads: “JPMorgan and Bear were prompted to renegotiate after shareholders began threatening to block the deal and it emerged that several ‘mistakes’ were included in the original . . . . One sentence was ‘inadvertently included,’ according to a person briefed on the talks, which requires JPMorgan to guarantee Bear’s trades even if shareholders voted down the deal. . . . When the error was discovered, James Dimon, JPMorgan’s chief executive, who was described by one participant as ‘apoplectic,’ began calling his lawyers at Wachtell, Lipton, Rosen & Katz to seek a way to have the sentence modified, these people said. Finger pointing over the mistakes in the contracts began as bankers blamed the lawyers and vice versa.”

J.P. Morgan was counseled by Wachtell Lipton’s Ed Herlihy and Nick Demmo. Representing Bear was S&C’s Rodgin Cohen, Cadwalader’s Dennis Block, and Skadden’s Peter Atkins.

We placed a call to the lawyers at Wachtell. We’ll let you know if we hear back.

Update: Monday morning, JP Morgan agreed to quintuple its per-share price for Bear, from $2 to $10.

Full post as published by Law Blog - WSJ.com on March 24, 2008 (boomark / email).