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Barclays seals Lehman deal

Posted by Yogesh on Tuesday, 16 September, 2008

Lehman Brothers on Tuesday reached a deal to sell certain parts of its business to Barclays, which had been in talks over the weekend to buy the entire investment bank before it filed for bankruptcy protection on Monday.

The two parties reached a deal in the early New York morning, though the exact Lehman businesses involved, and the price at which they will be sold, remained unclear. A deal could be accompanied by a small capital raising by the UK lender.

People close to the matter said it was likely that the deal centered around Lehman’s core US broker-dealer operations, which perform securities underwriting tasks, provide merger advice to lucrative clients, and conduct trading.

Lehman’s European and Asian investment banking divisions had also been part of the discussions between the two banks, sources have said. In the first instance, the transaction is likely to exclude Lehman entities based in Europe, although Barclays is thought to be interested in acquiring some of these subsequently.

An agreement to buy Lehman’s core business would significantly boost Barclays’ US presence, and would allow it to build up a US investment banking business quickly, rather than by slowing hiring away rival firms’ bankers.

Now that Lehman’s parent company has filed for bankruptcy, it is likely that Barclays will purchase the operations at a low price. Lehman has been scrambling against the clock to sell operations that have not filed for bankruptcy protection, which also include its Neuberger Berman asset management business, before their value evaporates as employees leave for other firms and accounts are transferred.

Barclays pulled out of high-stakes talks to find a buyer for Lehman over the weekend, when it became clear US authorities would not guarantee Lehman’s trading book until Barclays could win the approvals it needed to seal a deal.

Shares in Barclays fell 12 per cent or 38p to 278p in afternoon London trading, in line with sharp falls among other UK financial stocks. Source FT

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