Neuberger Berman Management, Lehman to Purchase Investment Unit
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By Jason Kelly and Jonathan Keehner
Dec. 4 (Bloomberg) -- Lehman Brothers Holdings Inc. agreed to sell its investment management business, including the Neuberger Berman fund unit, to its managers in a deal that gives the bankrupt securities firm a 49 percent stake. Terms weren’t disclosed.
The group, including Lehman executive George Walker, beat out a previous bid of $2.15 billion by private-equity firms Bain Capital LLC and Hellman & Friedman LLC. The buyers will own 51 percent of the new company, they said today in a statement.
The transaction gives Lehman’s creditors a chance to recoup more money down the line, said Jim Fogarty, chief operating officer of Lehman and a managing director with Alvarez & Marsal, the firm that is overseeing Lehman’s liquidation. Lehman’s shares in the company eventually will be distributed to creditors, he said.
“Values in general are at a low point throughout the world,” Fogarty said in an interview after the deal was announced. “We picked it as the preferred answer because we think this is worth a lot of money over time.”
Richard Fuld, Lehman’s former chief executive officer, put the unit up for sale in August in a last-ditch effort to raise cash and keep the New York-based investment bank alive. The auction continued after Lehman filed for bankruptcy on Sept. 15.
The business was valued at around $7 billion in August by Sanford & Bernstein analysts and initially drew interest from some of the world’s biggest private-equity firms, including Blackstone Group LP and KKR & Co. LP., neither of which ultimately bid.
Bain, Hellman Bid
The proposal by Boston-based Bain and Hellman & Friedman of San Francisco was made on Sept. 29. Carlyle Group, the world’s second-biggest private-equity firm behind Blackstone, weighed a bid with former Neuberger CEO Jeffrey Lane after the Bain and Hellman proposal was approved.
Carlyle and Lane decided not to bid before the Dec. 1 deadline, which was extended twice.
The firm’s value was eroded as the Standard & Poor’s 500 Index lost about a quarter of its value between the announcement of Bain and Hellman’s bid and the deadline for competing offers. Bain and Hellman had the right to walk away from the deal if the S&P had an average closing price of less than 902 in the 10 days before the deal closed. The S&P closed at 816.2 on Dec. 1.
“It was important to us that there was a certainty of closing,” Walker said yesterday.
Lehman bought New York-based Neuberger Berman in 2003 for $3.2 billion to expand its wealth-management business, and later consolidated its asset-management operations into a single division. Lehman sold its North American brokerage business to Barclays Plc and is in the process of selling off or liquidating other assets. The sale of the investment unit must be approved by the bankruptcy court.
Neuberger Investment Management
Walker, a cousin of President George W. Bush, will be CEO of the new company, named Neuberger Investment Management. Walker, 39 was also to have been CEO if Bain and Hellman won the bidding.
The company, which had assets of about $160 billion as of Nov. 30, includes the Neuberger Berman money-management business, which traces its roots back to 1939. It also includes the former Lehman’s private funds investments group, as well as the asset-management unit that includes fixed-income and commodities investing groups.
The resolution may give comfort to Neuberger’s clients, whose money is overseen by teams of managers, Walker said. It also may ease concerns about changes related to how private-equity firms might run the company.
“This outcome puts all questions to rest regarding what a new owner could mean for Neuberger’s investors,” said Isabel Schauerte, an analyst with Boston-based Celent, a financial consulting firm.
To contact the reporters on this story: jkelly14@bloomberg.net; Jonathan Keehner in New York jkeehner@bloomberg.net.
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