Barclays buys Lehman for a song

September 17, 2008 – 7:37 pm

The British bank Barclays scooped up Lehman’s good assets for a song the day after it filed bankruptcy.  From the Journal:

Barclays PLC agreed to acquire the bulk of [Lehman] for $1.75 billion.

Barclays is buying a stripped-clean version of Lehman’s North American business, which will include most of its people, franchise, brand name, technology and clients but won’t include the risky trades and liabilities that had hurt Lehman in the markets before its Chapter 11 bankruptcy-court filing.

Barclays also gets Lehman’s headquarters and data centers.  They are paying $1.5 billion for that real estate and getting the rest of Lehman’s franchise for a cool $275 million.

Two years ago, Lehman’s market cap was $45 billion.  According to Bloomberg (via SWF Radar) Lehman turned down $6.40 per share from Korea Development Bank two weeks ago.  That would have valued the biz at between $4 and $5 billion.  They got $1.75 billion.  Oops.

This is why I question B of A’s move to buy Merrill so soon.  Had B of A waited a couple days, the crisis of confidence would likely have driven Merrill’s equity value to zero.  At that point, B of A could have bought Merrill’s valuable assets for peanuts.  AND they wouldn’t have had to absorb Merrill’s toxic balance sheet.

Warren Buffett also has billions of free cash.  He may pull of a deal like Barclays’ in the near future.

Post a Comment