AP
Barclays may acquire more of Lehman
Wednesday September 17, 2:33 pm ET
By Robert Barr, Associated Press Writer
Barclays says it has options on some Lehman Brothers assets outside US


LONDON (AP) -- Barclays PLC said Wednesday it may pick up some of Lehman Brothers assets and employees in Europe and Asia, on top of the British bank's deal to acquire key U.S. operations from the failed investment bank.

"Options, not obligations," Group Chief Executive John Varley said of the possibility of salvaging more of Lehman Brothers businesses.

Barclays PLC, the third-largest British bank, took advantage of Lehman Brothers Holdings Inc.'s bankruptcy reorganization to reach a deal on Tuesday for Lehman's North American investment banking and trading operations for just $250 million.

Barclays also picked up Lehman's New York headquarters and two data centers in New Jersey for $1.5 billion, all subject to court and regulatory approval.

Barclays President Robert D. Diamond Jr. said in a conference call with analysts that Barclays' interest was primarily in the U.S. cash equities business, as part of the company's goal to boost its earnings from North America.

"It's an absolute machine, it's extremely profitable," Diamond said.

"We wouldn't want to miss the opportunity to add some of the talent from the U.K. and Europe to the team," Diamond added.

"It would most typically be where Lehman has a strong position and BarCap (Barclays Capital) a weak position."

The two executives also indicated a possible interest in some assets in Asia.

In a statement earlier Wednesday to the London Stock Exchange, Barclays confirmed the deal and said that some of its shareholders had expressed interest in subscribing to at least $1 billion of additional equity in support of the acquisition and to beef up Barclays capital base.

"The proposed acquisition of Lehman Brothers North American investment banking and capital market operations accelerates the execution of our strategy of diversification by geography and business in pursuit of profitable growth on behalf of our shareholders, in particular increasing the percentage of Barclays earnings sourced in North America," Varley was quoted in the statement as saying.

"This transaction delivers the strategic benefits of a combination with Lehman Brothers core franchise, whilst meeting Barclays strict financial criteria, and strengthening our capital ratios."

Meanwhile PriceWaterhouseCoopers, which is administering Lehman's assets in London, said staff there would receive their September pay packets -- as long as they come into work.

In efforts to close the sale of U.S. assets, Lehman asked a bankruptcy judge on Wednesday for initial approval of the sale of assets to Barclays Capital Inc. for $1.7 billion in cash. The matter was scheduled for a hearing Wednesday afternoon, and a second hearing for final approval may be held Friday, according to the court filing.

Lehman lawyers said the investment bank needed to close the deal quickly to preserve the remaining value of its assets. The agreement with Barclays calls for the deal to close within a week, on or before Sept. 23.

The judge will also consider a breakup fee of $100 million plus $25 million in expenses to be paid by Lehman to Barclays if the deal falls apart and a competing bidder steps in.

Lehman also said it had made a list of 200 employees it said were "key" to the business and another eight were determined to be "critical" to its success. It said the retention of a majority of those employees was part of the agreement.

Under the proposed deal, Barclays would continue to employ about 10,000 Lehman employees based in the U.S. for 90 days, or pay them severance equal to what was promised by Lehman. Lehman estimated that such severance payments would cost Barclays about $2.5 billion.

Barclays would also pick up Lehman contracts, some of which would be transferred when the deal closes and a second group that could move to Barclays within 60 days.

Lehman also said in court filings that it was putting up its once-prized investment management unit, Neuberger Berman Holdings LLC, as collateral for a $450 million loan to fund operations while in bankruptcy.

Lehman also asked a judge to approve the $450 million in loans from Barclays PLC. Of the $450 million, $250 million would be a term loan and $200 million a revolving loan. The money would be used for fees to lawyers and financial advisers and personnel expenses.

The loan would mature either six months after the close of the credit facility or at the termination of the buyout deal, whichever is first.

Barclays shares closed up 3.7 percent in trading on the London Stock Exchange at 317.75 pence ($5.74).