Lehman exercises Archstone share purchase right, completes acquisition

By Caroline Salls

Pittsburgh, Jan. 23 - Lehman Brothers Holdings Inc. has delivered a binding notice exercising its right of first offer and completed the acquisition of 50% of the interests held by Bank of America Corp. and Barclays plc in Archstone, according to an 8-K filed with the Securities and Exchange Commission by Equity Residential.

As previously reported, Equity Residential subsidiary and operating partnership ERP Operating LP agreed in December to acquire the interests Archstone interests in question for $1.325 billion.

ERP's acquisition of the interests was subject to Lehman exercising its right of first offer.

Immediately following the closing of Lehman's acquisition of the interests, the purchase agreement was terminated.

According to an 8-K filed with the SEC by Lehman, Lehman now owns 73.5% of Archstone.

Lehman said it designated wholly owned subsidiary ACQ SPV I Holdings LLC and Lehman Commercial Paper Inc. wholly owned subsidiary ACQ SPV I Paper LLC to take ownership of the Archstone interests purchased from Bank of America and Barclays.

Under a separate agreement between ERP and sellers Bank of America and Barclays, ERP is entitled but not obligated to exercise its right to acquire all other interests held by the sellers in the Archstone entities for at least the $1.325 billion purchase price at any time from Jan. 20 through Feb. 19.

If exercised, ERP said its purchase of the other interests will also be subject to Lehman's right of first offer to buy the interests.

If ERP offers more than $1.325 billion and Lehman exercises its right on the other interests, a break-up fee must be paid by Bank of America and Barclays to ERP, the 8-K said.

Lehman said in its 8-K that it believes the sellers' execution of the other interest agreement is in breach of Lehman's contractual agreements with Bank of America and Barclays.

As previously reported, Lehman has filed claims against the sellers related to the Equity Residential purchase agreement and the other interest agreement that are pending before the U.S. Bankruptcy Court for the Southern District of New York.

According to the Equity Residential 8-K, some affiliates of the sellers have performed investment banking, commercial banking and advisory services for ERP, and some affiliates of the sellers may engage in transactions and perform services for ERP for which they will receive customary fees and reimbursement of expenses.

In addition, Equity Residential said some of the sellers' affiliates are lenders, case agents for lenders or managers for lenders under ERP's revolving credit facility.

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 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 08-13555.

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