Lehman, Archstone interest holders look to stall sale to competitor

By Caroline Salls

Pittsburgh, Dec. 15 - Lehman Brothers Holdings Inc. and several other holders of equity interests in the Archstone group of companies filed a lawsuit Thursday in connection with the proposed sale of some of the Archstone interests to ERP Operating LP, an affiliate of Archstone's largest apartment business competitor Equity Residential.

Lehman said the defendants in the lawsuit want to sell one-half of their Archstone interests to ERP and have granted Equity Residential an option to buy the balance of their interests if the plaintiffs exercise a right of first offer in connection with the proposed interest transfer.

The company said the plaintiffs have delivered their notices of intent to exercise the right of first offer, giving them until Jan. 23 to obtain court approval, deliver a binding notice of election to purchase and pay a $66 million deposit and to close the transaction and pay the balance of the $1.325 billion purchase price within two business days.

Through the lawsuit, the plaintiffs are asking the court to enjoin the defendants from completing any transfer to Equity Residential, including any proposed transfer under the option, and to divest the defendants of their voting and governance rights in the Archstone entities.

"In violation of several significant contractual provisions, defendants have conspired to sell their combined approximately 53% interests in Archstone to Archstone's largest competitor - Equity Residential," the lawsuit said.

In addition, the plaintiffs are asking the court to clarify the terms of their right to purchase the interests the defendants have proposed to sell.

The plaintiffs are also asking the court to stay their time for delivering a binding election notice, making the $66 million deposit and closing the transaction, pending clarification of the scope of their right of first offer.

Lehman said the plaintiffs are also seeking an injunction keeping the defendants from transferring any of their Archstone interests pending a court ruling and expedited discovery.

New York-based Lehman Brothers Holdings was the fourth-largest investment bank in the United States. The company filed for bankruptcy on Sept. 15, 2008. Its Chapter 11 case number is 08-13555.

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