JP Morgan Chase 2008 Annual Report Download - page 140

Notes to consolidated financial statements
138 JPMorgan Chase & Co./ 2008 Annual Report
As a result of step acquisition accounting, the total $1.5 billion purchase price was allocated to the Bear Stearns assets acquired and liabilities
assumed using their fair values as of April 8, 2008, and May 30, 2008, respectively. The summary computation of the purchase price and the allo-
cation of the purchase price to the net assets of Bear Stearns are presented below. The allocation of the purchase price may be modified through
May 30, 2009, as more information is obtained about the fair value of assets acquired and liabilities assumed.
(in millions, except for shares (in thousands), per share amounts and where otherwise noted)
Purchase price
Shares exchanged in the Share Exchange transaction (April 8, 2008) 95,000
Other Bear Stearns shares outstanding 145,759
Total Bear Stearns stock outstanding 240,759
Cancellation of shares issued in the Share Exchange transaction (95,000)
Cancellation of shares acquired by JPMorgan Chase for cash in the open market (24,061)
Bear Stearns common stock exchanged as of May 30, 2008 121,698
Exchange ratio 0.21753
JPMorgan Chase common stock issued 26,473
Average purchase price per JPMorgan Chase common share(a) $ 45.26
Total fair value of JPMorgan Chase common stock issued $ 1,198
Bear Stearns common stock acquired for cash in the open market (24 million shares at an
average share price of $12.37 per share) 298
Fair value of employee stock awards (largely to be settled by shares held in the RSU Trust(b)) 242
Direct acquisition costs 27
Less: Fair value of Bear Stearns common stock held in the RSU Trust and included in
the exchange of common stock (269)(b)
Total purchase price 1,496
Net assets acquired
Bear Stearns common stockholders’ equity $ 6,052
Adjustments to reflect assets acquired at fair value:
Trading assets (3,831)
Premises and equipment 497
Other assets (235)
Adjustments to reflect liabilities assumed at fair value:
Long-term debt 504
Other liabilities (2,252)
Fair value of net assets acquired excluding goodwill 735
Goodwill resulting from the merger(c) $ 761
(a) The value of JPMorgan Chase common stock was determined by averaging the closing prices of JPMorgan Chase’s common stock for the four trading days during the period March 19, 2008,
through March 25, 2008.
(b) Represents shares of Bear Stearns common stock held in an irrevocable grantor trust (the “RSU Trust”) to be used to settle stock awards granted to selected employees and certain key exec-
utives under certain heritage Bear Stearns employee stock plans. Shares in the RSU Trust were exchanged for 6 million shares of JPMorgan Chase common stock at the merger exchange ratio
of 0.21753. For further discussion of the RSU trust, see Note 10 on pages 167–169 of this Annual Report.
(c) The goodwill was recorded in the Investment Bank.