LONDON: Barclays said yesterday it had reached a deal to acquire the North American investment banking and capital markets businesses of beleaguered US investment giant Lehman Brothers for $1.75 billion.
The bank said it would acquire trading assets with an estimated value of $72 billion (40 billion pounds, 50 billion euros) and liabilities worth $68 billion for a cash consideration of $0.25 billion.
In addition, Barclays will acquire Lehman’s New York headquarters and two data centers in the state of New Jersey for a combined near market value of $1.5 billion, with the total deal worth about $1.75 billion.
The acquisition would cover operations employing about 10,000 Lehman staff, and remains subject to approval by regulators and New York’s bankruptcy court, after Lehman went bankrupt on Monday. “The board of Barclays announces that Barclays has agreed, subject to US Court and relevant regulatory approvals, to acquire Lehman Brothers North American investment banking and capital markets operations and supporting infrastructure,” it said in a statement issued in London.
Barclays, Britain’s third biggest bank, had at the weekend walked away from a merger deal with the 158-year-old Lehman, saying that such a tie-up would not have been in the best interests of Barclays’ shareholders.
Lehman’s collapse has plunged the financial system into turmoil, although the announcement by the US Federal Reserve that it was loaning up to $85 billion to save teetering insurance giant AIG brought some reprieve. The massive Lehman bankruptcy filing in US federal court in New York listed $639 billion in assets and $613 billion in debt.
Barclays said the acquisition had the potential to create “significant value” for its shareholders, as the bank increased its presence in the United States. And it said some of its shareholders had expressed an interest in increasing their shareholdings in the bank, to a value of at least $1 billion.
“This is a once in a lifetime opportunity for Barclays,” said the British bank’s president, Robert Diamond, announcing the Lehman deal. “We will now have the best team and most productive culture across the world’s major financial markets, backed by the resources of an integrated universal bank.”
Barclays said the Lehman business were a “highly complementary fit” to its own investment banking business, Barclays Capital, and because of this it hoped to achieve a “rapid integration” to minimize disruption to staff and clients. “We welcome the opportunity to add Lehman’s people and capabilities to the Barclays team,” Diamond said.
Lehman Brothers chief operating officer, Herbert McDade, said: “Lehman Brothers’ strength has always been our client franchise.
“With this transaction, we have the opportunity to continue the growth and development of our US investment banking and capital market franchises with one of the leading financial institutions in the world.”
