UPDATE 2-Bear Stearns investors drop bid to block buyout

(Recasts throughout; adds details about lawsuit, additional comments from plaintiffs' lawyer; byline)

By Martha Graybow

NEW YORK, May 7 (Reuters) - Bear Stearns Cos Inc BSC.N shareholders suing over the planned JPMorgan Chase & Co. (JPM.N: Quote, Profile, Research) takeover are dropping efforts to block the deal but will seek damages of at least $2.8 billion, an attorney for the plaintiffs said on Wednesday.

Investors have withdrawn a motion in New York State Supreme Court for a preliminary injunction aimed at halting the deal, said Daniel Krasner, a senior partner at law firm Wolf Haldenstein Adler Freeman & Herz LLP. A hearing on that request had been scheduled for Thursday.

But Krasner said the shareholder case would continue, with investors seeking damage claims. JPMorgan is offering $10 a share for Bear stock, which Krasner said is much too low. The shares should be valued at a minimum of $30 each, he said.

"We think it's in the best interests of the Bear stockholders to let the transaction proceed and sue for damages," Krasner told Reuters. "We think that monetary recovery is all that is really available to the Bear stockholders at the end of the day."

There is now little in the way of legal challenges standing in the way of JPMorgan completing the planned buyout of the troubled investment bank, which was first announced in March. Bear Stearns shareholders are set to vote on the deal on May 29.

Krasner, one of several lawyers representing the plaintiffs, said that the attorneys decided to change their strategy after considering all of the facts in the case.

It now "is inevitable that JPMorgan is going to acquire Bear -- the only question is what is a fair price," he said. "The lawsuit will continue as a damage claim. We believe that we are entitled to a jury trial on that."