Management-team bid wins out over (reluctant?) rivals for Lehman businesses. A group of senior executives of Lehman Brothers' Neuberger Berman has topped a $2.15-billion bid from private-equity firms Bain Capital Partners and Hellman & Friedman to acquire a majority stake in Neuberger Berman and the fixed-income and alternative asset-management businesses of Lehman Brothers' Investment Management division.

Lehman filed for bankruptcy protection in September 2008.

The unspecified bid from a collection of Neuberger Berman's portfolio managers, senior professionals and top-floor brass -- including George Walker, head of asset management for Lehman Brothers and a cousin of U.S. president George Bush -- prevailed in a bankruptcy-court auction yesterday.

The bid is subject to the court's final OK later this month. If all goes according to plan, the deal should close early in 2009.

The management team's offer won out because it provides greater value and more certainty of closing, according to Lehman's COO James Fogarty.

Old guard

"We regard this transaction as the best outcome for the creditors of Lehman Brothers," says Fogarty, who is also a managing director of New York-based corporate turnaround specialists Alvarez & Marsal. "[Neuberger Berman] has a top-notch team in place that knows the business and is highly motivated to deliver value."

The management team will end up with 51% of Neuberger Berman and Lehman's alternatives business, which is to be re-named Neuberger Investment Management. Lehman will hold the balance. The businesses in question managed about $160 billion at the end of November 2008. Neuberger Berman had $63.7 billion under management when Lehman paid $2.6 billion for it in 2003.

"We are thrilled to be moving forward toward becoming an independent, standalone company," says Walker. "Our portfolio-management and client teams are extremely enthusiastic about this next chapter in our history."

Walker is tipped to be Neuberger Berman's CEO -- as he was when Boston-based Bain Capital and San Francisco-based Hellman & Friedman seemed likely to be its next owners. The old deal also allowed for an unspecified degree of equity participation by Neuberger Berman's management team and senior portfolio managers.

Sigh of relief?

Hellman & Friedman managing director Allen Thorpe says his firm is "disappointed not to [have won] the bidding for" Neuberger Berman, but wishes Walker "and the rest of the [Neuberger Berman] management team well." Bain Capital managing director Phil Loughlin expresses "utmost respect for [Neuberger Berman], its senior management team and portfolio managers and remain confident in [its] continued success."

The listed value of Lehman's asset-management business has dropped sharply since Bain Capital and Hellman & Friedman made their initial offer on 29. The private-equity firms had a get-out clause if the S&P closed under 902 in the 10 trading days before the deal's close. In fact the broad-market gauge hasn't closed above 900 since early in November.

Another firm touted as a possible bidder for Neuberger, Washington, D.C.-based private-equity giant Carlyle, dropped out of contention before the 1 December deadline for bids.

London-based Barclays agreed to buy Lehman's investment-banking, brokerage and research operations along with some real estate in Manhattan and nearby New Jersey within a few days of Lehman's bankruptcy filing. -FWR

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