KKR leads race to grab Lehman unit
Kohlberg Kravis Roberts, the high profile US private equity firm, is leading the race to buy Lehman Brothers’ investment management business, including fund manager Neuberger Berman.
Lehman, headed by CEO Richard Fuld, has been fishing for suitors for up to 70 per cent of its investment management unit in order to raise cash ahead of third quarter results, which are expected to be dismal.
And the sale of Neuberger and other assets could help the investment bank make up for up to £2bn in predicted losses related to subprime debt and struggling commercial real estate assets.
Two other private equity firms, Hellman & Friedman and Bain Capital have also been told that they remain in the running to buy part of Lehman’s asset management business, although no decision has yet been taken to sell.
But private equity giant Blackstone has turned its nose up at the sale, expressing no interest in Neuberger at all and considering a $7bn bid from Carlyle as too low.
Fuld is in a race against time to pull Lehman’s battered balance sheet from the mire as he faces repeated calls for a change in leadership at the company.
He is thought to have been soliciting a major investment from a sovereign wealth fund in a bid to maintain the company’s independent status.
Other options could include the sale of part or all of its commercial property portfolio, worth around £22bn. But the firm’s fragile balance sheet means it is unlikely to see a stock issue as a viable capital-raising method.
Lehman was hit by another setback on Monday when the Korean Development Bank was warned off a bid for 50 per cent of the company by the country’s top financial regulator Jun Kwang-woo.
Lehman had earlier walked away from the deal over failure to agree a price, but was thought to be considering revisiting the deal until the KDB’s interest cooled.