JPMorgan Chase & Co.s expected acquisition of Bear, Stearns & Co. should create an even bigger player in healthcare finance, but seems likely to have little effect on hospital systems that have used Bear Stearns.
JPMorgan made its offer last week to snatch up Bear Stearns Cos., parent of Bear, Stearns & Co., for about $2 per share, or about $236 million. Losses on subprime mortgage securities devastated Bear Stearns. Its stock plummeted from more than $100 per share as recently as December 2007 to trading near $6 per share late last week, according to Commodity Systems.
The deal would forge a larger, single player in not-for-profit healthcare investment banking by combining the units at each firm. Combined, Bear Stearns and JPMorgan might have ranked as high as No. 3 in tax-exempt hospital bonds for which it was the lead manager in 2007, according to data from Thomson Financial. Separately, JPMorgan was sixth, managing $2.86 billion in bonds, and Bear Stearns was ninth, with $1.23 billion. Their combined total of $4.09 billion would put them third, just ahead of Morgan Stanley, with $3.36 billion managed last year, but the combined total may contain some double counting of issues for which Bear Stearns and JPMorgan were joint lead managers. Both firms declined to comment last week. Citigroup was the largest lead manager, handling $9.12 billion in a 2007 market of $40.07 billion, according to Thomsons figures.
One of Bear Stearns largest customers in recent years, New York-Presbyterian Healthcare System, said the banks difficulties have no impact on the New York City-based system. Over the years, when bonds are issued on our behalf, several co-managers underwrite these deals. Their role is limited to the initial issuance of the debt. Bear Stearns, as well as other banks, have provided such services to us, spokesman John Rodgers said. The changes occurring at Bear Stearns, however, have no impact on our outstanding bonds or our ability to issue them in the future. Bear Stearns was a co-manager with Goldman Sachs & Co. on a $296.1 million issue for New York-Presbyterian in September 2007.
Catholic Healthcare Partners, Cincinnati, recently switched from Bear Stearns to a new underwriter, but the change had nothing to do with the banks turmoil, spokesman Orest Holubec said. As part of a periodic review, the system published a request for proposals from underwriters late last year and chose another firm, Holubec said. It was a tough decision, because we had a relationship with Bear Stearns, but it was not related to anything going on with them this year, Holubec said. Bear Stearns was co-manager on two bond issues totaling $405 million for the system in May 2006.
A few hospital systems that have had bond issues handled by Bear Stearns in recent years refused to discuss their relationship with the bank. Partners HealthCare System, Boston, used Bear Stearns last summer as one of several underwriters for parts of a multiseries bond issue totaling $620 million, bond documents showed. A Partners spokeswoman said in an e-mail that the system does not comment on its relationships with financial institutions. Reading (Pa.) Hospital and Medical Center also declined to discuss its relationship with Bear Stearns, which was the lead underwriter on a $65 million bond issue sold on behalf of the hospital in December 2007. Bear Stearns is the lead underwriter on a $184.8 million issue scheduled to be sold this week for Memorial Hermann Healthcare System, Houston, according to Moodys Investors Service. A Memorial Hermann spokeswoman did not respond by deadline. The firm also handled a $120 million issue for Memorial Hermann in March 2007.