The Bear Stearns (NYSE: BSC) roller coaster ride took another sharp turn today after J.P. Morgan (NYSE: JPM) agreed to quintuple its offer for troubled investment bank. The move came amid widespread criticism that J.P. Morgan was getting a free ride on the backs of Bear Stearns shareholders. The new $10 per share takeover is slated to close by April 8th and now has much greater shareholder support.

The revised deal may seem generous on the part of J.P. Morgan, but it is really not that much different. The common stock component of the old deal was a mere $289 million compared to the billions in losses that it would incur during the acquisition. Moreover, the common stock buyout was to take place through a share exchange that stood to only moderately dilute JPM shareholders. The new deal simply increased this exchange rate from 0.05473 to 0.21753.

J.P. Morgan is still making bank from the Federal Reserve bailout. The investment bank is only responsible for the first billion in losses incurred while the remaining $29 billion tab is being picked up by the Federal Reserve. This means that the total acquisition price is only a billion plus share dilution - still a great deal for J.P. Morgan for an investment bank that was one of Wall Street's finest.

The revised deal is also much more likely to see the light of day. Many dissident shareholders are now satisfied while J.P. Morgan also agreed to purchase 39.5% of the company in order to ensure that it could win any proxy opposition to the deal more easily. Whether or not this deal still gives preference to J.P. Morgan is a topic that could be debated, but at least shareholders were able to get a much higher offer.

In the end, this saga has a lot of lessons and investors should take note. The first is to look at deal components when evaluating whether or not a higher offer is likely. The second is to watch what the majority shareholders are doing as they are most likely to influence a higher bid. Combined, these factors made BSC one of the most interesting stocks to watch over the past few weeks.

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