British billionaire Joe Lewis, who has $1.26 billion invested in Bear Stearns, called the bank to register disapproval of the hastily arranged deal, which was backed by the U.S. Federal Reserve.

Lewis has said he would take "whatever action" was necessary to block the deal, The New York Times (NYSE:NYT) reported.

J.P. Morgan increased its offer Sunday.

Investors bid the price of Bear Stearns up to $5.96 a share last Friday in anticipation of a better deal, the report said.

The Fed, which accepted the risk on $30 billion of Bear Stearns assets in the deal last Sunday, must approve any deal and balked at the increased price offer as it would look more like a government bailout of the bank, sources said.

Bear Stearns Chief Executive James Dimon has asked large banks to hold off on offering jobs to Bear Stearns employees and told an employee group last week to "give J.P. Morgan a chance."

"I feel terrible sometimes when people think we took advantage," he said.