WaMu shares fall after news of deal

Shares of Washington Mutual Inc., the largest U.S. savings and loan, fell 3% as stockholders resigned themselves to a $7-billion capital infusion that may dilute their holdings by half.

The lender rejected a bid by JPMorgan Chase & Co., the third-largest U.S. bank, that valued the company at about $8 a share, a person familiar with the talks said. The person declined to be identified because negotiations were confidential.

Instead, Washington Mutual sold securities to a group led by David Bonderman’s TPG Inc., increasing the shares outstanding by as much as 50%.

“This wasn’t a bad deal,” said David Ellison, manager of two bank mutual funds for Friedman, Billings, Ramsey Group Inc. in Arlington, Va. Investors may fare better with a recapitalization because it can be repeated and still leaves hope for a rebound, he said. “You can always sell later, but you can only sell once.”

Shares fell 36 cents to $11.45.