A proposal to merge JPMorgan Chase & Co. and the Bear Stearns financial house, with Bear Stearns becoming a direct, wholly owned subsidiary of JPMorgan Chase and Bear Stearns’ public utility subsidiaries becoming indirect wholly owned subsidiaries of JPMorgan Chase, was authorized by FERC Monday.

The Federal Energy Regulatory Commission (FERC) found that the transaction will not have an adverse effect on competition or rates and will not create a regulatory gap at the federal level. FERC also found that the transaction will not result in cross-subsidization because neither company has any controlling interest in any franchised public utility with captive customers.

Last month JPMorgan Chase said it was acquiring The Bear Stearns Companies Inc. in a stock-for-stock exchange (see Daily GPI, March 18). JPMorgan Chase said it would exchange 0.05473 shares of JPMorgan Chase common stock per one share of Bear Stearns stock. Based on the closing price of March 14, the transaction would have a value of approximately $2/share. JPMorgan Chase later raised its offer to 0.21753 of JPMorgan Chase common stock per one share of Bear Stearns stock, or approximately $10/share.

JPMorgan Chase guaranteed the trading obligations of Bear Stearns and its subsidiaries and is providing management oversight for its operations. Other than shareholder approval, the closing is not subject to any material conditions. The transaction is expected to have an expedited close by the end of the second quarter. The Federal Reserve, the Office of the Comptroller of the Currency and other federal agencies have given all necessary approvals.

In addition to the financing the Federal Reserve ordinarily provides through its Discount Window, the Fed will provide special financing in connection with this transaction. The Fed has agreed to fund up to $30 billion of Bear Stearns’ less liquid assets.

Bear Stearns has scheduled a special shareholder meeting on May 29 to vote on the proposed acquisition. Bear Stearns shares closed Monday at $10.67, down 1.11% on the day and off 93.28% from a 52-week high of $158.79.

Earlier this month JPMorgan Chase reported $2.4 billion net income (68 cents/share) for 1Q2008, down from $4.8 billion ($1.34) in 1Q2007. JPMorgan Chase shares closed Monday at $47.34, down 0.94% on the day.

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