Stocks Rise on Lehman Buyout Hopes

Updated from 9:57 a.m. EDT

Stocks were climbing Friday as traders cheered a report that an overseas buyer could have its eye on stumbling New York investment bank Lehman Brothers (LEH), one of the companies at the center of investors' continuing angst about the credit markets.

The Dow Jones Industrial Average was rising 181 points to 11,612, and the S&P 500 was adding 11 points to 1289. The Nasdaq was gaining 23 points to 2403.

The primary driver behind the upward move was a Reuters report that the Korea Development Bank considered a bid for at least part of Lehman, which has recently been victimized by reports that it's struggling to raise capital and that its subprime exposure may prove crippling.

According to the report, the government-controlled Korean bank didn't reach an agreement with Lehman because it was worried about the U.S. firm's health. Still, a spokesman indicated that KDB would keep its options open. Shares of Lehman were advancing nearly 15% to $15.74.

Art Hogan, chief market strategist at Jefferies, said a takeover of Lehman is entirely possible. "Pick a number, say $20 a share," he said. "Say, 'What can I sell the Neuberger business for, and what can I get for free?'" He said that although Lehman still may have more skeletons in its closet, "To a certain extent you don't have to have a glowing endorsement. You've just got to make a deal."

On the other hand, talk is cheap, said Michael Church, portfolio manager at Church Capital Management. "I'd like to see some action there." He said he wasn't surprised to see that the market was happy about the possibility of a Lehman acquisition. "Putting Lehman out of its misery is probably a good thing at this point."