(Agencies)
Updated: 2008-03-15 10:40

Bankers and analysts rattled off a list of potential suitors but suggested them with caution, saying it's unclear why any company would buy Bear Stearns when they could pursue stronger assets at other banks.

"The question someone would ask if they were in a potential M&A position would be, Shouldn't we just go after the people? Bring the people in rather than by the firm," said Michael Holland, chairman of private investment firm Holland & Co.

In addition to JP Morgan, potential buyers include Merrill Lynch & Co Inc (MER.N) and foreign companies such as HSBC Holdings Plc (HSBA.L), Barclays Plc (BARC.L) and Royal Bank of Scotland Plc (RBS.L), some bankers and analysts said.

"If you think about a company like Bear, they don't have hard assets, just computers, office space and people, and one would imagine that people at Bear are polishing up their resumes," said James Ellman, portfolio manager at Seacliff Capital in San Francisco.

"That's how Wall Street works -- when a firm is in trouble, clients leave and your best employees leave. We've seen this story many times before," Ellman said.

Bear Stearns currently trades at 4.9-times fiscal 2008 earnings estimates, compared with the sector average of 18.5-times earnings.

In addition, foreign banks could face some regulatory problems that would add headaches to the purchase of an already ailing company, analysts said. And U.S. banks could try to buy the bank in pieces instead of as a whole, analysts said.

"As far as who in the US would look to take them over -- there are possibilities but I think every American outfit would say, 'We've got our own headaches'," Sabino said.

Bear Stearns' problems emerged because it has more exposure to the US bond markets than its competitors and has a large mortgage-backed securities business.

It's unclear whether Bear Stearns will be able to survive the "run on the bank" that Schwartz described if customers continue to flee and its businesses deteriorate further.

"JPMorgan might buy it for a dollar. I mean you're going to get a good price. Ultimately you have to ascertain if the assets are worth more than the liabilities," Barish said.

Bears' cheap stock price might entice some suitors to take a risk in buying the firm, some investment bankers said. "Just because someone wasn't interested at $120 might doesn't mean they wouldn't be interested at $34," said one head of investment banking at a US brokerage firm. "Bear Stearns now is under pressure to preserve what assets they have, protect their people, protect their clients.

"They might be forced to sell at a price that would have been unthinkable before."

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