Barclays PLC, the third-biggest British bank, struck a deal to acquire the trading and investment banking business of Lehman Brothers Holdings Inc., a person with knowledge of the matter said Tuesday.
The deal could throw a lifeline to more than 9,000 Lehman employees whose future was uncertain after Lehman filed for bankruptcy protection Monday. Lehman collapsed from massive exposure to risky real estate holdings.
Barclays may use less than $2 billion of its own money to buy Lehman's broker-dealer unit and get a cash injection from investors to help finance the business, a person familiar with the situation said.
The London-based bank would take licenses, buildings and as many as 10,000 people who trade and underwrite securities and advise on acquisitions.
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Lehman is selling off pieces of itself, including the brokerage and asset-management units, that weren't included Monday when the holding company filed the biggest Chapter 11 bankruptcy in history. Barclays President Robert Diamond said last month that he wanted the bank to take market share from Wall Street firms weakened by the credit crunch and break into the top tier of U.S. 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 Tuesday.
“A cash deal would be likely to weaken Barclays' capital measures, a development we see as dangerous,” said Chambers, who has a “sell” rating on the stock.
Lehman is in discussions to sell its investment-management unit to private-equity bidders including Bain Capital LLC, Clayton Dubilier & Rice Inc. and Hellman & Friedman LLC, according to four people familiar with the negotiations. Lehman is proceeding with an auction announced last week as part of Chief Executive Officer 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 U.S. 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.
Lehman was forced into bankruptcy after both Barclays and Bank of America walked away.
Also Tuesday, the House Oversight and Government Reform committee said it would hold a hearing Sept. 25 to examine the “regulatory mistakes and financial excesses” that led to Lehman's bankruptcy filing. The Associated Press contributed.