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Barclays to buy Lehman units

Bloomberg News / September 17, 2008
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Barclays PLC, the United Kingdom's third-biggest bank, will acquire the North American investment-banking business of bankrupt Lehman Brothers Holdings Inc. for $1.75 billion, two days after abandoning plans to buy the entire firm.

Barclays is paying $250 million in cash for the Lehman businesses and $1.5 billion for the securities firm's New York headquarters and two data centers, the London-based bank said on its website yesterday. The operations employ about 10,000 people.

Lehman is selling off pieces of itself that weren't included Monday when the holding company filed the biggest Chapter 11 bankruptcy in history. Barclays president Robert Diamond said last month he wants the bank to take market share from Wall Street firms weakened by the credit crunch and break into the "top tier" of US securities firms.

"While this could be a positive development for the long run, given the current market conditions, we are skeptical that the market is going to reward any deal," Derek Chambers, a London-based analyst at Standard & Poor's Equity Research Ltd., said in a note to investors.

The purchase includes the equities and fixed-income sales, trading and research businesses, commodities and foreign exchange, merger advisory, and prime brokerage units, Barclays said.

Lehman is in discussions to sell its investment-management unit to private-equity bidders Bain Capital LLC and Hellman & Friedman LLC, according to people familiar with the negotiations. The firm is also proceeding with an auction announced last week as part of chief executive Richard Fuld's failed plan to save the 158-year-old firm.

Diamond was in New York last weekend as Lehman met with Wall Street executives to discuss a rescue plan. Lehman needed a bailout after Korea Development Bank pulled out of a plan to provide new capital and Lehman shares lost most of their value.

Barclays declined to bid for all of Lehman after three days of emergency negotiations involving the US Treasury and Federal Reserve, Barclays spokesman Leigh Bruce said Sunday. Barclays couldn't get guarantees from the government to mitigate what it called Lehman's "open-ended" trading obligations.

Bank of America Corp. also walked away from a possible Lehman acquisition over the weekend.

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