BRITISH FEAST ON LEHMAN FIRE SALE
British banking giant Barclays struck a deal to buy most of bankrupt Lehman Brothers yesterday for roughly $2 billion – potentially saving as many as 10,000 employees from having to find other jobs amid this financial crisis.
The UK’s third-largest bank, which walked away from buying Lehman last weekend after the federal government refused to take on the firm’s toxic mortgage assets, formally announced the deal last night.
The agreement is subject to bankruptcy court and regulatory approval.
Barclays will buy Lehman’s investment banking and broker dealer unit, which includes equity and debt underwriting, merger advice and proprietary trading.
Barclays chief Bob Diamond told Lehman employees on the trading floor of their Midtown headquarters around 2:45 p.m. yesterday.
It also includes Lehman’s headquarters building, built in 2001 and which could fetch on the open market between $600 million and $900 million.
Such a price roughly values the company’s ongoing operations at about $1 billion. Also sold are its two data centers in New Jersey.
The deal does not include Lehman’s coveted Neuberger Berman investment-management unit.
Diamond expressed sympathy for Lehman’s workers as they polished their resumes and prepared to look for new jobs – at one point saying, “I feel your pain,” according to one Lehman employee present.
Also present at the meeting was recently appointed Lehman COO Bart McDade. Notably absent was embattled chief Dick Fuld.
By purchasing Lehman after it plunged into bankruptcy protection, Diamond can pick up some of the firm’s more profitable businesses on the cheap while avoiding its nearly $40 billion in securities backed by mortgages.
Because Lehman is under bankruptcy court protection, the firm’s bad assets can be liquidated over time in order to pay off creditors.
Diamond has publicly stated that he plans to aggressively expand in several key US markets including leveraged finance, M&A, mortgage finance and structured products.
Diamond, a former Morgan Stanley banker, said last month he wants Barclays to take market share from Wall Street firms weakened by the credit crunch and break into the “top tier” of US securities firms.
“While this could be a positive development for the long run, given the current market conditions, we are skeptical that the market is going to reward any deal,” Derek Chambers of Standard & Poor’s Equity Research said in a note.
“A cash deal would be likely to weaken Barclays’ capital measures, a development we see as dangerous.”
New York Senator Chuck Schumer praised the quick deal, saying, “It is the best hope for retaining a substantial majority of the jobs in New York. I have spoken to Lehman CEO Dick Fuld, Federal Reserve Chairman Ben Bernanke and New York Fed President Tim Geithner and urged that they do all they can to ensure a timely deal.”
Meanwhile, Fuld was asked yesterday to testify in a congressional probe of the company’s bankruptcy scheduled for Sept. 25.
Lehman is still in discussions to sell Neuberger to private-equity bidders including Bain Capital and Hellman & Friedman, according to people familiar with the negotiations.