Bear Stearns: Takeover Speculation Returns

I'm beginning to understand why Bear Stearns CEO Jimmy Cayne was hesitant to take over the prime-brokerage duties for his firm's own hedge funds: yet again, Bear is being talked about as a takeover candidate. The latest pundit to prognosticate about a Bear acquisition is Merrill Lynch bank analyst Guy Moszkowski, who said on Friday, according to DealBook, "that if the investment bank loses a lot of money in the rescue effort, it could become vulnerable to a takeover attempt".

Of course, Moszkowski is very well insulated from being wrong here by that whopping great "if". It's worth remembering that so far Bear hasn't lost anything at all, and that in fact there's a decent chance it might end up making a fair amount of money on the deal. Bear is still refusing to bail out the more highly levered of the two troubled funds, which also puts it in a safer position.

That said, Bear is always a takeover candidate, if only because it's much smaller than rivals such as Lehman Brothers or Moszkowski's own Merrill Lynch. It's trading at a price-to-book ratio of 1.6, which seems pretty low compared to Merrill's 2.0, Lehman's 2.2, Morgan Stanley's 2.4, and Goldman Sachs's 2.7. And there's always some big European universal bank which wants to expand its investment-banking footprint in the US. But color me unconvinced for the time being: if Bear has remained independent this long, I doubt a dodgy hedge fund or two will constitute its undoing.