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Deutsche sole European bank to bid for Bear Stearns

Deutsche Bank was the only big European bank to bid for Bear Stearns in last week's fire sale and it might get another shot as shareholders balk at the takeover by JP Morgan Chase.

Published: 20 March 2008 10:16 CET

The biggest German bank stayed in the bidding until late in the process, the business daily Handelsblatt reported on Thursday, citing financial industry sources.

Over the weekend, JP Morgan Chase agreed to buy Bear Stearns for a bargain price of two dollars per share – far below their close on Friday of $30 – to avert collapse of the 86-year-old institution.

According to Handelsblatt, Deutsche Bank might still get a chance to buy Bear Stearns because shareholders in the US investment bank have staged a revolt against the cut-rate deal with JP Morgan Chase.

The New York banking giant got backing from the US Federal Reserve for its rescue of Bear Stearns and shares in the investment bank closed on Wednesday at $5.33.

British billionaire Joe Lewis, a major shareholder, and former Bear Stearns chief executive James Cayne were now reportedly working to block JP Morgan Chase’s takeover and might invite rival bidders to make fresh offers.

According to the Financial Times, Lewis and a number of Bear Stearns staff who own equity in the bank were set to vote against the JP Morgan Chase deal. The New York Post reported that Lewis had contacted several investment funds and banks including Barclays, HSBC, Credit Suisse and Royal Bank of Scotland.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year.

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’, Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn.

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment?

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024 about 1 percent below the estimated structural level.

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending?

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”. The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”.

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025.

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023.

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write.

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers.

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.”

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