Lehman Brothers to be a “take under’’ candidate?

Posted by: Ben Steverman on June 30, 2008

By Matthew Goldstein

Shares of the battered investment bank took another beating on Monday on widespread speculation that a rival firm was going to make a bid for Lehman Brothers (LEH) at a substantial discount to its current price. Much of the speculation, traders say, focused around Barclays (BCS), the British-based bank. Lehman shares fell 11% to finish under $20.

The talk on Wall Street is that Barclays may be preparing to make a bid for Lehman at a severe discount from Monday’s closing price. Officials with Barclays had no comment, and a Lehman spokesman says, “no comment per our policy of not commenting on rumor or speculation.” In any transaction, Lehman’s most prized asset may be its Neuberger Berman asset management group, which it acquired five years ago for $2.6 billion.

Last week Barclays announced that it was raising $8.9 billion in capital through a sale of stock to a group of private investors. The bank, like many Wall Street firms, is raising capital to shore-up its balance sheet. But some have speculated that Barclays is raising more capital than it needs, given that it has not had as much in subprime writedowns as other financial firms. This has led to speculation that Barclays might also be raising capital to finance an acquisition.

Lehman shares have been under pressure for months because of poor earnings and soaring write-downs. But for the moment, the talk about Barclays or another big bank stepping in to buy Lehman is nothing more than Wall Street chatter. Lehman CEO Richard Fuld, on a number of occasions, has said the firm has no interest in being acquired.

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Reader Comments

Shane Persaud

July 1, 2008 01:10 AM

Leahman Brothers will be acquired sooner or later at a significant discount. The question then is not if but when and by who. It's highly unlikely that JP Morgan Chase (the least affected American Bank by the sub prime mortgage crisis) will enter a bidding war with an international bank such as Barclays because of its Bear Sterns acquisition. Also, Bank or America is currently in a bind with Countrywide in considering what assets to keep and what to sell and also is facing possible lawsuits and legal constraints tied to Countrywide. In addition, Citi Bank is currently looking to become slimmer and leaner after massive losses tied to mortgage backed assets. As such this acquisition is not attractive for them. I am sadden for these legendary financial institutions (Bear Sterns and Leahman); however, they dig there own graves out of greed and failing to realize that history do repeat itself. Sadly they are now examples for the next generations.

tangdynasty

July 1, 2008 01:31 PM

Frankly without trawling through the arguments I really believe that Lehman is going to be just fine. Sure it all looks precarious now but I have no doubt that it will emerge soundly.

Better be right because I have put my money where my mouth is!!!

Praful Halakhandi

July 1, 2008 03:10 PM

Dear TangDynasty,

Not to comment on the what happens with Lehman (as much as I want to). Just wanted to confirm, you have put money where your mouth is or you are putting your mouth where your money already has been for sometime.

wgcdrsps

July 2, 2008 03:35 PM

with the lehman coming out with stock options for its employees to retain talent,I do not think they have any intention of handing over the control.They will survive and do well.

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Businessweek’s Emily Thornton, Amy Feldman, Ben Levisohn, and Ben Steverman focus on matters great and small for investors, from the views of a hot fund manager to an explanation of the latest products devised by Wall Street’s rocket scientists. Exploring trends in any area, from bonds and stocks to closed-end funds and futures, always with an eye towards giving investors a better understanding of the sometimes confusing and often chaotic world of finance. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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