NEW YORK - BEAR Stearns Cos shareholders may be hoping that another suitor will emerge to challenge JPMorgan Chase & Co, but perhaps their best hope of getting a higher price is prying a few extra dollars from JPMorgan itself, analysts said.

By getting enough shareholders to commit to vote against the deal, they may be able to get JPMorgan to budge.

'There is a time element to this. All the other firms are in there, trying to swoop up Bear employees and customers.... If I were JPMorgan, I'd pay an extra dollar a share just to get the deal done in a reasonable period of time,' said Gordon Marchand, portfolio manager at Sustainable Growth Advisers in Stamford, Connecticut.

'People are fantasising,' said Keith Wirtz, president and chief investment officer at Fifth Third Asset Management, which manages US$22.5 billion (S$31.2 billion).

Bear Stearns shares closed Wednesday at US$5.26, more than double the value of JPMorgan's offer. Still, that was down 11 per cent from their surge the day before, in what could be a sign of waning optimism about a higher price.

JPMorgan Chase & Co agreed to buy Bear on Sunday in a deal now worth nearly US$340 million, or about US$2.32 a share. The deal happened with the encouragement of the Federal Reserve, which feared that if Bear went out of business, the entire US financial system could be shaken.

JPMorgan for its part is not worried about a rival bidder and does not plan to adjust the terms of the deal, a person familiar with the bank's thinking said. JPMorgan declined to comment.

But there may be many parties voting against the acquisition, including credit derivatives traders hoping to push Bear into bankruptcy to collect on their credit default swaps.

Investors that bought Bear Stearns shares when they were over US$100 or over US$150 might want much more than a few dollars a share, and may also vote against the acquisition in its current form. It's not clear if a few extra dollars would appease them. But a few extra dollars might appease investors that bought on Monday at, say, US$3 a share.

White knight - a fairy tale?
Some investors are hoping for other potential buyers to emerge. The New York Post reported that Bear Stearns Chairman James Cayne and top shareholder Joe Lewis are looking for a bidder to top JPMorgan's offer.

The Financial Times, however, reported that people familiar with Mr Lewis denied he was looking for other bidders, saying he thought JPMorgan would end up buying Bear but that he would agitate for a higher price.

The merger agreement between JPMorgan and Bear suggests that Mr Cayne would not be able to solicit other bids. The agreement states that Bear's employees can't 'solicit, initiate, encourage, facilitate ... or take an other action designed to facilitate any inquiries or proposals regarding any ... alternative transaction'.

Mr Cayne, reached late on Tuesday, said he wasn't talking to reporters.

The likelihood of another buyer coming in is remote, investors said. Few US banks have the capacity on their balance sheets to take on the potential liabilities at Bear, even with US$30 billion of financing that JPMorgan Chase received from the Federal Reserve for Bear Stearns assets.

The Fed would not likely offer financing to a foreign bank for a deal, because the central bank cares more about preserving market stability than getting the highest possible price for Bear shareholders, an arbitrageur said.

And private equity funds are also unlikely to get Fed financing, and would also not provide the same assurance of stability to Bear customers, the arbitrageur said.

The Fed is working to stabilize markets, but it's a difficult job. On Wednesday, Merrill Lynch & Co Inc said it sued XL Capital Assurance to prevent the insurer from backing out on credit default swaps. The lawsuit fuelled speculation that Merrill may need to take further write-downs, helping to drag down the broader market. -- REUTERS