Management Group Wins Neuberger

By Vinnee Tong

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.