JP Morgan Chase 2010 Annual Report Download - page 168

Notes to consolidated financial statements
168 JPMorgan Chase & Co./2010 Annual Report
As a result of step acquisition accounting, the final total purchase price of $1.5 billion 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 final summary computation of the purchase
price and the allocation of the final total purchase price of $1.5 billion to the net assets acquired of Bear Stearns are presented below.
May 30, 2008
(in millions, except shares, per share amounts
, ratios
and where otherwise noted)
Purchase price
Shares exchanged in the Share Exch
ange 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 tran
s
action
(95,000
)
Cancellation of shares a
c
quire
d 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 stoc
k
holders’ equity
$
6,052
Adjustments to reflect assets acquired at fair value:
Trading assets
(3,877
)
Premises and equipment
509
Other asse
ts
(288
)
Adjustments to reflect liabilities assumed at fair value:
Long
-
term debt
504
Other liabilities
(2,289
)
Fair value of net assets acquired excluding goodwill
611
Goodwill resulting from the merger
(c)
$ 885
(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 through 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 executives 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 210–212 of this Annual Report.
(c) The goodwill was recorded in Investment Bank and is not tax-deductible.
Condensed statement of net assets acquired
The following condensed statement of net assets acquired reflects the final values assigned to the Bear Stearns net assets as of May 30, 2008.
(in millions)
May 30, 2008
Assets
Cash and due from banks
$
534
Federal f
unds sold and securities purchased under resale agreements
21,204
Securities borrowed
55,195
Trading assets
136,489
Loans
4,407
Accrued interest and accounts receivable
34,677
Goodwill
885
All other assets
35,377
Total as
sets
$
288,768
Liabilities
Federal funds purchased and securities loaned or sold under repurchase agreements
$
54,643
Other borrowings
16,166
Trading liabilities
24,267
Beneficial interests issued by consolidated VIEs
47,042
Lon
g
-
term debt
67,015
Accounts payable and other liabilities
78,569
Total liabilities
287,702
Bear Stearns net assets
(a)
$
1,066
(a) Reflects the fair value assigned to 49.4% of the Bear Stearns net assets acquired on April 8, 2008 (net of related amortization), and the fair value assigned to the
remaining 50.6% of the Bear Stearns net assets acquired on May 30, 2008. The difference between the net assets acquired, as presented above, and the fair value of
the net assets acquired (including goodwill), presented in the previous table, represents JPMorgan Chase’s net losses recorded under the equity method of accounting.