JP Morgan Chase today confirmed it will increase its offer for Bear Stearns from $2 to $10 a share, in a move that will value the stricken Wall Street investment bank at $1.3 billion.

Shares in Bear Stearns today rose 78.3 per cent to $10.63, above JP Morgan's new offer, after the bank's stock was briefly suspended in New York as details of an amended bid began to emerge.

JP Morgan said today it will bear the first $1 billion of losses on Bear Stearns' assets while America's central bank, the Federal Reserve, will fund the remaining $29 billion.

As part of the original deal, the US Fed was going to bear $30 billion worth Bear Stearns' "toxic" securities.

Oil is the key to world recovery

The shock of $140 oil has created inflationary and deflationary pressures that threaten world economy and policy tools

• Former President Bush energy adviser says oil is running out

BACKGROUND

• Oil is the key to world recovery

• Banks may need to pump billions into scheme

• UK economic growth weakest for three years

Related Internet Links

• Full credit crunch coverage

BACKGROUND

• Happy days are over for UK households

• Banks restrict mortgages by brokers

• Credit crunch halves lending at Nationwide

• JPMorgan to cut Bear Stearns jobs

• George Soros: Crunch will bite deeper in UK

Related Links

• Billionaire Lewis to halt Bear Stearns rescue

• Cayne risks lawsuit over Bear Stearns offer

• Financial workers braced for redundancies

JP Morgan also said today that as part of the revised deal, it will buy 39.5 per cent of Bear Stearns in an effort to gain some control after investors, including British billionaire Joseph Lewis, threatened to halt a takeover priced at the original offer of $2 a share. Under the initial deal, Bear Stearns was worth just $240 million.

Under state law in Delaware, where the companies are incorporated, a company can sell up to 40 per cent without shareholder approval.

The Dow Jones industrial average opened strongly, up 83 points to 12,444 as traders gained confidence on a higher price for Bear Stearns.

Better-than-expected US housing figures also fuelled sentiment after the National Association of Realtors said sales of homes rose by 2.9 per cent in February on prices down to a 40-year low.

Bear Stearns shares have traded above $2 since the deal was agreed on hopes JP Morgan will have to pay more for Bear Stearns if a counter-bidder emerges.

James Cayne, Bear Stearns' former chief executive who is currently chairman at the bank, and Mr Lewis have both said they are trying to find a higher offer for the group.

Mr Lewis, a British financier who has lost $1 billion on his investment in Bear Stearns, said he will stop JP Morgan's takeover by taking "whatever action" necessary and would "encourage" the bank and "third parties to consider other strategic transactions."

It is also understood that Legg Mason, the US fund manager, is planning to sue the Bear Stearns management team to try to prevent the bank being bought for just under $240 million by its larger rival.

The US's fifth-largest investment bank was brought to its knees as counterparties and customers fled amid fears that it was going bust.

Bear Stearns was forced to secure emergency funding from JP Morgan as part of a deal engineered by the US Federal Reserve before a takeover deal was rushed through to secure the future of the bank.

Alan Schwartz, president and chief executive at Bear Stearns, said today: "Our board of directors believes that the amended terms provide both significantly greater value to our shareholders, many of whom are Bear Stearns employees, and enhanced coverage and certainty for our customers, counterparties, and lenders.

Jamie Dimon, chairman and chief executive at JP Morgan Chase, said: "We believe the amended terms are fair to all sides and reflect the value and risks of the Bear Stearns franchise and bring more certainty for our respective shareholders, clients, and the marketplace.

"We look forward to a prompt closing and being able to operate as one company."

Times Recommends

• ‘Lame duck’ fear for FSA as chief quits
• Storm over bailout of EU's most ailing economy
• Northern Rock to drop 100% savings guarantee