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Management Group Wins Neuberger

The Associated Press

NEW YORK -- A group of managers and employees has won an auction to buy Lehman Brothers' prized investment management unit, which includes the Neuberger Berman money management business.

The bid from the Neuberger Berman group beat out two other competing bids, one of which came from the private equity firms Bain Capital Partners and Hellman & Friedman.

The size of the winning bid wasn't disclosed, but Bain and Hellman's bid had previously valued the unit at $2.15 billion.

Lehman Chief Operating Officer Jim Fogarty said the management group's bid offered greater value than other bids and had more certainty of closing. Fogarty in a statement called it the "best outcome for the creditors." Hellman's managing director Allen Thorpe said his firm was "disappointed."

Neuberger spokesman Randy Whitestone said the transaction would give 93% of $875 million in preferred equity to the bankrupt estate of Lehman Brothers, while 7% would be owned by management.

Management also would obtain a 51% stake in common shares in the new company, Neuberger Investment Management, with Lehman's estate getting 49%. The value of the common equity was not disclosed.

The transaction did not involve cash. The structure of the deal suggests that Alvarez & Marsal, the professional services firm overseeing the unwinding of Lehman's assets, saw more benefit for creditors from maintaining a stake in the asset management unit than from a one-time sale.

A representative for Lehman didn't return calls for comment, and officials from Bain and Hellman declined to comment beyond the statement.

The Bain-Hellman team had agreed to buy the unit in partnership with the management on Sept. 29, just two weeks after Lehman filed for protection from its creditors in the biggest bankruptcy in U.S. history.

That agreement kick-started a bankruptcy court auction that began in mid-October and ended Wednesday after bids were due Dec. 1. Private equity firm Carlyle Group raised objections over the sale process but did not end up submitting its own bid.

Lehman's Sept. 15 bankruptcy, six months after the fire sale of Bear Stearns, came at the beginning of a tumultuous month on Wall Street. The federal government has engineered takeovers of Fannie Mae(FNM Quote), Freddie Mac (FRE Quote) and AIG(AIG Quote). Regulators seized Washington Mutual and brokered a sale of its deposits and assets to JPMorgan Chase(JPM Quote). Former investment banks Goldman Sachs (GS Quote) and Morgan Stanley (MS Quote) asked to be made into traditional bank holding companies in order to stave off a market attack on their shares.