Bear Stearns Shares Gain on Buyout Talk

Is Bear Stearns the next brokerage to go on the auction block?

The Wall Street firm’s shares (ticker symbol: BSC) jumped $3.44 to $49.75 on the New York Stock Exchange Monday after an analyst at rival Salomon Smith Barney said Bear’s top executive may be open to a takeover.

Guy Moszkowski, the Salomon analyst, said in a report that Bear CEO James Cayne has indicated he would consider the right offer. Following a meeting with Cayne last week, Moszkowski said it was the first time the firm indicated any willingness to consider giving up its treasured independence.

“We sense that the willingness to consider the right buyer at the right price is greater now than it has ever been,” Moszkowki said.

Bear Stearns spokesman Benjamin Pratt declined to comment.

To be sure, all publicly traded companies are expected to consider offers and Cayne cautioned that the firm isn’t seeking a buyer.

Cayne also said any potential buyer would have to strengthen the firm by bolstering the balance sheet, extending its global reach and expanding its product breadth, according to Moszkowski. Suitors must also be willing to pay at least four times book value, or about $120 a share.

While Cayne’s asking price may seem steep, Bear Stearns is a highly profitable mid-tier brokerage trading at just six times estimated 2001 earnings per share.

Also, at $120 a share, Bear Stearns would sell at the same multiple at which PaineWebber Group sold out recently to Switzerland’s UBS--16 times next year’s estimated earnings per share.

The deal speculation comes as several European firms have swooped down to buy U.S. securities and money management firms this year. Its relatively small market value ($5.3 billion) makes Bear Stearns more vulnerable.