Lehman to Spin Out Private Equity: Report

The private-equity arm of Lehman Brothers has reached an agreement with its collapsed parent to spin out into an independent firm, while taking in a new investment from luxury-goods billionaire Johann Rupert, the Wall Street Journal reports.

As part of the move, the newspaper reports, the Lehman bankruptcy estate will retain a substantial interest in the private-equity shop, called Lehman Brothers Merchant Banking. The business has $4.5 billion under management.

The deal also involves South African billionaire Rupert, whose investment company Reinet Investments SCA will assume $250 million in unfunded commitments to the fund, according to the Journal.

Numerous private-equity firms including Blackstone Group (BX Quote) and Carlyle Group expressed an interest in acquiring the unit, the Journal reports. But instead of exiting the business entirely, Lehman decided to retain a substantial stake and spin off the rest to management.

Lehman filed for bankruptcy protection in mid-September.