Bear Stearns Merchant Banking will be spun off from JPMorgan Chase to become an independent private equity firm focused on middle-market investments. JPMorgan, through what's now its Bear Stearns Companies subsidiary, will retain a passive interest in "certain affiliates."

BSMB will change its name and move to new offices in New York. Its investment strategy will continue to be built around the retail/consumer, financial services, energy, industrial, healthcare, packaging and transportation areas. "We have built a successful investment portfolio, strategy and team of more than fifty professionals over the past eleven years," noted Chief Executive John D. Howard. "While we will be an independent entity, our strategy, industry focus, portfolio and current funds will remain in place."

The firm manages about $5 billion, according to The Wall Street Journal, which reports JPMorgan will assume about $1 billion of the firm's investments. The newspaper says the firms 50 or so employees were "largely insulated" from the fallout of Bear Stearns' failure. "Unlike most Bear Stearns employees, BSMB staffers weren't compensated with Bear Stearns stock, but were instead paid by distributions from the firm's funds," it says.