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February 16, 2007

Bear Stearns Eyes Takeover of Bear Wagner with Buyout

By Peter Chapman

Majority owner Bear Stearns is in negotiations to purchase the 40 percent stake of New York Stock Exchange specialist firm Bear Wagner that it does not own.

The big brokerage house owns Bear Wagner jointly with Hunter Partners. Bear Stearns is said to be trying to reach a final price with Hunter for complete ownership of Bear Wagner.

Behind the move is a desire of partners at Hunter to retire and cash out. But Hunter does not have enough cash to buy them out. So it has been forced to raise capital, say sources close to the firms.

Executives from Bear Wagner and Bear Stearns would not comment. Bear Stearns is offering the Hunter partners $30 million, sources say. That is about one-third of the book value of the partnership and down from an earlier proposal of $60 million roughly a month earlier.

Negotiations have gone slowly, sources say, but a deal is expected within a couple of months. The partners' exodus from Hunter comes at a time of declining volume on the floor of the NYSE and increased automation. The partners see a dim future as computers execute more of the volume at the Big Board. They also point to a leadership void at Bear Wagner. Trading legend John Mulheren, the firm's founder and managing partner, died three years ago. With Mulheren's passing, they say, went the firm's vision of how to innovate in an electronic trading world. Last month, Bear Wagner saw resignations of key personnel in structured products, technology, stock loan and clearing.