Bear Stearns set to announce spin-off

Marketplace Staff Jun 5, 2008
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Bear Stearns set to announce spin-off

Marketplace Staff Jun 5, 2008
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TEXT OF STORY

Scott Jagow: Investment bank Bear Stearns vanished over the weekend into the arms of JP Morgan. But as the buyout went through, the Bear did give birth to a new cub. The announcement is expected today — Bear’s private equity firm will be spun off as a separate company. Nancy Marshall Genzer has more.


Nancy Marshall Genzer: The private equity division, known as Bear Stearns Merchant Banking, won’t cut all ties to JP Morgan. It will be the new company’s biggest investor.

The Wall Street Journal reports JP Morgan will put about a billion dollars into the new company. Now, private equity firms make their money by purchasing companies, restructuring them and selling them for a profit.

Moody’s Economy.com chief economist Mark Zandi says this is a tough time to be doing that.

Mark Zandi: It’s hard to raise the money to make these purchases because people are nervous. The stock market is down from a year ago. It’s wobbly. So things aren’t normal.

Zandi doesn’t expect things to get back to normal for six to 18 months. And the baby bear won’t have access to back office support from papa Bear Stearns anymore, going it alone in a tough economy.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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