It’s been suggested for weeks now that Lehman Brothers (LEH) could raise up to $10 billion by selling all, or part of, Neuberger Berman, its investment management division. Private equity tells Dick Fuld to keep dreaming. CNBC:
As first reported by CNBC, Fuld, Lehman’s long-time chief executive, is looking to sell a 70 per cent stake in the investment management division and have an option to buy it back at a later date. As a carrot to the potential buyer is a warrant to purchase a 20 per cent stake in Lehman that could be cashed in when the credit crisis abates and the firm’s stock price recovers.
But potential buyers—which include nearly every major private equity firm—are starting to balk at Lehman’s initial offer, according to Wall Street executives familiar with the matter. Their problem is the price. Lehman is pricing the investment management division at around $10 billion, meaning a 70 per cent stake would cost $7 billion. but the real cost will be much more because asset management firms are only worth something if people stay following such a transaction. Potential bidders believe that unless they set up a large retention pool, something in the neighbourhood of $400 million to $500 million to keep employees at their jobs, the talent will walk, these people say
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