With High Risk and Cheap Stock, will Bear be Sold?

A person familiar with JPMorgan said the bank, which has previously expressed interest in expanding its prime brokerage business, is interested, at the right price, in buying the Bear division that provides loans and handles trades for hedge funds.

The concern for any buyer would be whether Bear Stearns has fully exposed all of its problems or if there is another debacle in the offing.

"Looking from the outside you have to ask, Are they at the end of their troubles? That's a very difficult question," said Anthony Sabino, professor of law and business at St. John's University, in New York.

Bankers and analysts rattled off a list of potential suitors but suggested them with caution, saying it's unclear why any company would buy Bear Stearns when they could pursue stronger assets at other banks.

"The question someone would ask if they were in a potential M&A position would be, Shouldn't we just go after the people? Bring the people in rather than by the firm," said Michael Holland, chairman of private investment firm Holland & Co.

In addition to JP Morgan, potential buyers include Merrill Lynch & Co Inc and foreign companies such as HSBC Holdings Plc, Barclays Plc and Royal Bank of Scotland Plc, some bankers and analysts said.

"If you think about a company like Bear, they don't have hard assets, just computers, office space and people, and one would imagine that people at Bear are polishing up their resumes," said James Ellman, portfolio manager at Seacliff Capital in San Francisco.

"That's how Wall Street works -- when a firm is in trouble, clients leave and your best employees leave. We've seen this story many times before," Ellman said.

Bear Stearns currently trades at 4.9-times fiscal 2008 earnings estimates, compared with the sector average of 18.5-times earnings.

In addition, foreign banks could face some regulatory problems that would add headaches to the purchase of an already ailing company, analysts said. And U.S. banks could try to buy the bank in pieces instead of as a whole, analysts said.