NEW YORK (Reuters) - Two Michigan pension funds are seeking emergency court action to stop the planned takeover of Bear Stearns Cos Inc BSC.N by JPMorgan Chase & Co JPM.N from moving forward, according to court papers.
The funds have asked the Delaware Chancery Court for a temporary restraining order blocking the sale of 95 million newly issued Bear Stearns shares to JPMorgan. The stock sale, set to close around April 8, is expected to give JPMorgan a big boost in its efforts to win shareholder approval of the proposed buyout of the ailing investment bank.
In court papers filed on Tuesday, the pension funds argued that the stock purchase, which would give JPMorgan a 39.5 percent stake in Bear Stearns ahead of a shareholder vote on the takeover, was “designed to eviscerate the voting rights” of current stockholders.
The buyout deal, struck as Bear Stearns faced a cash crunch and the possibility of imminent collapse, needs majority approval of Bear stockholders to go through.
“Anticipating stockholder disapproval, they have devised an improper plan to buy the necessary votes from the company,” the funds’ lawyers wrote.
The emergency order is being sought by the Police and Fire Retirement System of the City of Detroit, as well as the Wayne County Employees’ Retirement System. Both are Bear shareholders and in recent days have sued the company’s directors, saying they violated their fiduciary duties in agreeing to the JPMorgan deal and should be forced to look for higher offers.
JPMorgan declined to comment on the litigation, while a Bear Stearns representative could not immediately be reached.
Lawyers for the pension funds said that JPMorgan’s $10-a-share revised offer for the company -- up from $2 a share initially -- was “grossly inadequate.” In the court papers, the funds’ lawyers said that the deal provisions also effectively block any potential third-party bidder from making an offer.
The deal protections in the merger agreement are “draconian, coercive and preclusive,” they wrote.
(Additional reporting by Chris Reiter)
Reporting by Martha Graybow, editing by Dave Zimmerman
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