With high risk and cheap stock, will Bear be sold?

By Jessica Hall

PHILADELPHIA (Reuters) - The emergency rescue of Bear Stearns Co Inc BSC.N on Friday left observers from all quarters wondering who would be the last man standing at the Wall Street bank.

When a Bear Stearns analyst moved to ask a question at a biotechnology investor meeting, Genentech Chief Executive Arthur Levinson quipped, "There's still somebody here from Bear? Let's give him a hand."

"I'm still here," said Bear Stearns analyst Mark Schoenebaum. But pointing to a JPMorgan analyst, he said, "I think I work for Geoff Meacham now."

The rescue by JPMorgan Chase & Co (JPM.N) and the Federal Reserve Bank after Bear said its cash position had deteriorated sharply put the word takeover on the tip of tongues all over Wall Street, with JPMorgan seen as a leading contender to buy out Bear Stearns.

But while Bear's cheap stock price could attract some suitors keen to buy its mortgage finance and trading assets, its liquidity problems may prevent a deal from being consummated, analysts and bankers said.

Shares of Bear Stearns, the fifth largest U.S. investment bank which has been hard-hit by its heavy exposure to the faltering U.S. mortgage market, fell 45 percent, reducing its market value by $3.2 billion to $3.64 billion.

Bear Stearns Chief Executive Alan Schwartz said the company is working with Lazard Ltd. (LAZ.N) to examine its alternatives, but it will focus on protecting customers and "maximizing shareholder value."

He said Bear's first-quarter earnings would meet Wall Street expectations.

CNBC reported that Bear Stearns "is actively being shopped." While JPMorgan is "the most likely suspect," CNBC said it was not the only company to receive a pitch to buy the company.

"Our view is it would not be a surprise to see a merger announced over the weekend," said Andrew Brenner, senior vice president of MF Global in New York.

A person familiar with JPMorgan said the bank, which has previously expressed interest in expanding its prime brokerage business, is interested, at the right price, in buying the Bear division that provides loans and handles trades for hedge funds.

The concern for any buyer would be whether Bear Stearns has fully exposed all of its problems or if there is another debacle in the offing.

"Looking from the outside you have to ask, Are they at the end of their troubles? That's a very difficult question," said Anthony Sabino, professor of law and business at St. John's University, in New York.

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.