At Bear Stearns, "Everything Is for Sale"

With Ace Greenberg passing the chairman mantle to James Cayne, the new boss says he would never rule out a takeover

On June 26, Wall Street legend Alan "Ace" Greenberg, 73, resigned as chairman of securities firm Bear Stearns & Co., relinquishing his title to 67-year-old Chief Executive James Cayne. Greenberg, who was with Bear Stearns for 52 years, will remain chairman of its executive committee but not of the board of directors. Recently, BusinessWeek Investment Banking Editor Emily Thornton caught up with Greenberg on the firm's trading floor and with Cayne in his office, where he keeps a red Xingfu motorcycle. Here are edited excerpts from her conversations...

...With James Cayne, smoking a Monte Cristo cigar:

Q: Why is Greenberg retiring now?


About three months ago, [he] came to me and said he wanted to step down from the chairmanship and slide over to become the chairman of the executive committee. I said you have to give me some idea of what your timing is. Jack Welch will announce four years in advance. Sandy Weill will announce three years in advance. But he said, no, I want to do it imminently. It was his call.

The implementation wasn't difficult. There weren't a lot of candidates to be chairman of this company between him and me. It was the most seamless transition in the history of Wall Street. I haven't had a contentious moment with Alan Greenberg in 32 years. We're like good friends. I'm his biggest booster.

Q: Is this a reorganization to prepare Bear Stearns for a sale?


You mean am I sprucing us up, going to market with a little apple in our mouths? Nah. We don't have the right to say we're not for sale because that's absurd. But we feel there is a compelling reason for a firm that's independent like us to be in the marketplace and to remain independent.

However, if that strategic partner showed up that could clearly enhance our shareholder value, it would be ridiculous for us not to talk to him. Anything good for the shareholders is good for us. Forty percent of the stock is held by insiders. We are shareholder-value-driven. So you can't say you're not for sale. Everything is for sale, except your family. That's it.

Q: There was a perception about 10 months ago that a price four times book value would be acceptable to you.


The only reason I said four was because the last purchase, which was what [Swiss Banking giant] UBS paid for PaineWebber, was 3.5. If someone wants to talk to Bear, let's start at 4. I would consider strategic alternatives with the right partner. It's not price-defined. If there's a strategic partner that will increase shareholder value and we feel it will take us to a spot that will take an awful long time for us to reach [on our own], it would be folly not to have a conversation.

Q: What are the areas that a strategic partner would have to help transform?


Equity issuance. Corporate lending. Marry the two, which is a bank's way to go into the investment banking business.

Q: I've heard that you have been in talks with several different potential partners over the past year.



Q: Why didn't a deal emerge?


All the stars have to be lined up just perfectly. It includes geography. It includes product mix. It includes management structure. It includes valuation. It includes a lot of different things, and even then something dramatic has to happen to say "Let's go." That hasn't happened yet. It's not a prime mover on my part.

Q: How will the changes in management change the way Bear Stearns will be run?


It won't. It's the same CEO.

Q: The competitive landscape is dramatically changing. How will Bear Stearns survive on its own?


I think there's room for someone like us. We're very busy. We're very focused. We're hiring.

Q: Why would someone want to join Bear Stearns?


There is no bureaucratic bull****. This is the real deal. You show up. You win. You're happy. You come back the next day. This is show time.

Q: You have named two new co-presidents. Was there pressure on you to promote new blood?


Not a chance. I'm the reason these guys are here. And I'm the reason they got promoted. This is such a different type of firm. They've got success, internal support.

Q: Have you told the board they will be your successors?


Nope. And the board didn't ask. It can't be anyone else, let's put it that way.

Q: Are you worried that co-presidencies have a history of not working out very well on Wall Street?


In 1985, I became a co-president. It worked for me.

...And with Ace Greenberg:

Q: Why are you retiring now?


I've always wanted to quit on top. Like Beverly Sills. I just thought it was time to make some minor changes. I spoke to Jimmy [James Cayne] and told him he should pick the time to do it. Why he picked this week I have no idea. I also thought [Bear Stearns' newly appointed co-presidents] Alan [Schwartz] and Warren [Spector] have done a spectacular job and should get some recognition. I think it's important for any organization to show an orderly transition. There's nothing abrupt about this. I'm still chairman of the executive committee.

Everything is the same except that I work for Jimmy now. I didn't want to be in the position where I should quit or be forced out or something like that. I didn't want to be seen as hanging around when I shouldn't.

When I say quit on top, I don't refer to Bear Stearns. Bear Stearns has a long way to go. I just felt it was time for me to show that I was easing off a little bit. I could be right or wrong. I guess it was an instinct like the birds go South in the fall. It was no deep thing. I just thought it was time.

Q: Do you think the firm will now head in a different direction?


I hope not.

Q: How will your responsibilities change now that you're head of the executive committee?


Well, I'm still chairman. Jimmy's chairman of the board of directors now, and I'm chairman of Bear Stearns. It's only a day old. I don't know how far I'm stepping back. I'll do whatever I need to make the firm grow and prosper.

We had an idea many years ago that we wanted anyone who worked here for a considerable amount of time to be able to retire with dignity. I get to work between 8:00 a.m. and 8:15 a.m. Now, I think I'll get to work between 8:09 and 8:16 a.m. That's the major change.

Edited by Thane Peterson

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