We’ll likely know today whether new bidders will emerge for Lehman Brothers’ prized Neuberger Berman asset management business. That’s because today at noon is the court ordered deadline for counterbids to the sale of Neuberger agreed in September.
In September, Bain Capital and Hellman & Friedman agreed to buy the unit for $2.15 billion. Objections to the sale, however, were made to the court handling Lehman’s bankruptcy, with both the private equity group Carlyle and former Neuberger Berman Chief Executive Jeffrey Lane claiming the price was too low. The judge ordered that alternative bids would have to be filed by noon on the first of December.
Although the business was often said to be worth as much as $9 billion, it’s not clear that there will be new bidders. We’ve heard scuttlebutt that Lane has had trouble attracting other bidders. What’s more, many believe the value of the Neuberger franchise has been damaged by the long, drawn-out sales process and the bankruptcy of Lehman.
Over the weekend, Bloomberg reported that even the purchase by Bain and Hellman could be endangered by recent market turmoil. That deal has a rather unique condition that allows the buyers to back out if the S&P 500 average closing price is less than 902 for the 10 trading days before the sale closes.
The average for the last 10 days has been about 844, after the index reached its 52-week intraday low of 741.02 on Nov. 21. When the parties signed the deal Oct. 3, the S&P closed at 1099.23.
“The buyer gets the comfort of knowing that a certain market decline does create an out on the deal that is clean,” said Owen Pell, a commercial and securities litigation lawyer at White & Case, about tying the deal to the market. He isn’t involved in the Lehman transaction.
By setting a floor for the S&P 500’s value as a closing condition, rather than relying on the material adverse event clause in the agreement, the buyers may avoid potentially difficult and expensive litigation, Pell said. The buyers may also choose to waive the condition.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.