Lehman's Neuberger Berman unit to be acquired by management

By Rebecca Melvin

New York, Dec. 3 - A group consisting of portfolio managers, the management team and senior professionals agreed Wednesday to acquire a majority interest in Neuberger Berman and the fixed income and alternative asset management businesses of Lehman Brothers Holdings Inc., according to a company news release.

Management will control 51% of the new company with Lehman Brothers retaining a 49% stake.

The winning bid trumped an earlier bid from the private equity firms of Bain Capital LLC and Hellman & Friedman LLC, which agreed in September to purchase the division for $2.15 billion and which was used to start the auction process.

Under the auction bidding procedures, there was a $52.5 million break-up fee plus expenses capped at $35 million.

Final bankruptcy court approval is scheduled for later this month, and closing is expected in the first quarter of 2009.

As part of the transaction, a new, independent investment management company to be called Neuberger Investment Management will be created comprising businesses that managed about $160 billion of assets as of Nov. 30.

The management bid was selected as the highest offer because it offered greater value and certainty of closing, said Jim Fogarty, a managing director with Alvarez & Marsal and chief operating officer of Lehman Brothers Holdings.

The management acquisition includes the businesses of Neuberger Berman (primarily equities products and services, mutual funds, and a strong emphasis on high net worth and institutional clients), Lehman Brothers Asset Management (fixed income, commodities and quantitative portfolio management), and Lehman Brothers' private funds investment group, which includes the fund-of-funds businesses (both hedge fund and private equity), secondary private equity, and co-investment. Several startup private equity businesses, including infrastructure and mezzanine debt, are also included.

George Walker, global head of investment management for Lehman Brothers, will be chief executive of Neuberger Investment Management, and Joe Amato will continue to lead Neuberger Berman, its largest operating unit.

There were three bidders in the auction held Wednesday, including the stalking horse bidder, according to Lehman bankruptcy attorney Shai Waisman, who spoke to reporters after a bankruptcy court hearing earlier Wednesday.

Bidding procedures for the proposed sale were approved by the U.S. Bankruptcy Court for the Southern District of New York in October, after revisions were made to satisfy objections that asserted the initial procedures were unfair.

The Bain and Hellman bid allowed the purchasers to walk away if the S&P 500 index sunk below a certain threshold - but they wouldn't be able to drop the deal until June 2009.

The investment management division has 1,912 employees.

Other bankruptcy court actions

Also on Wednesday, the court approved Lehman's motions to advance up to $3 million in legal defense costs to each of the former employees that are involved in investigations and arbitrations.

The bankrupt investment bank was also authorized to pay $20,000 in prepetition art-handler claims for warehouse services for art valued at $8 million.

Bankruptcy judge James Peck also approved the company's request to sell its Falcon 50 airplane assets.

A motion by Moody's Corp. seeking payment of a $2.1 million cure amount for services provided was denied.

New York-based Lehman Brothers is the fourth-largest U.S. investment bank. It filed for bankruptcy on Sept. 15, and its Chapter 11 case number is 08-13555.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.