Rivals circle Lehman in Asia

The chance of finding a buyer for the firm's Asian business appears slim after Barclays grabs the US operations and competitors start to woo key staff and clients in the region.
The news in the early hours of yesterday morning that Barclays has agreed to buy Lehman BrothersÆ US operations no doubt came as a huge relief to the firmÆs 10,000 or so US staff members that now have a chance of keeping their jobs. But at the same time it added to the uncertainty about what will happen to LehmanÆs businesses in Asia after the US investment bank filed for Chapter 11 bankruptcy protection earlier this week.

A press release issued by Barclays yesterday made no mention of the operations in this part of the world, but noted that LehmanÆs US businesses are ôa highly complementary fitö for its investment banking business, Barclays Capital.

ôThis is a once in a lifetime opportunity for Barclays,ö said Robert Diamond, president of Barclays. ôWe will now have the best team and most productive culture across then worldÆs major financial markets, backed by resources of an integrated universal bank.ö

A separate release sent out by Lehman Brothers did, however, state that Barclays Capital ôintends to immediately commence discussions with the relevant international regulatory authorities to acquire Lehman BrothersÆ similar operations outside North Americaö, offering some hope for the 3,000 staff in Asia that part of the operations in this region too may be retained as one entity. But while BarclaysÆ top management acknowledged in a telephone conference yesterday evening (Hong Kong time) that it has the option to pick up some of the remaining regional businesses, their comments suggested that it is the assets in Europe and the UK that are the most interesting to them.

Similar views are expressed by bankers in Asia, who say a takeover of LehmanÆs business in this region would be a lot more complicated since it is spread over numerous jurisdictions. And although one cannot rule out that potential buyers will emerge û aside from Barclays, Korea Development Bank has also indicated that it may still be interested in parts of the business after it decided against tabling a rescue bid for the whole of Lehman last week û a more likely scenario is that rival banks will move in to pick up the most valuable staff, leaving Lehman with little choice but to dissolve the remaining operations.

As a result of Lehman Brothers having filed for bankruptcy in the US, the funding to its various units in Asia has effectively already been cut off. LehmanÆs sales and trading desks in Hong Kong are also largely without work at the moment as the local stock exchange has suspended the firm from trading in stocks and options listed on the exchange.

The fight for Lehman staff has started already, although for now nobody wants to be seen to be too aggressive. It is still unclear whether the Lehman staff in this region will be let go and whether they will receive any compensation if they are. For now, employees have been told to continue to report to work every day.

A couple of rival firms say they are eying Lehman employees across product categories such as investment banking, capital markets, sales & trading and research, and expect to make at least a few hires in the near-term. One headhunter says that his firm has received hundreds of CVs from Lehman staff and has also received inquiries from other banks about suitable candidates. He notes that several rival banks view this as such a good opportunity for adding new talent that they will temporarily lift their current hiring freezes to make the most of it.

Meanwhile, attempts by other investment banks to capture LehmanÆs clients and outstanding mandates are also under way û in some cases prompted by the clients themselves as they try to ensure a seamless execution of their ongoing deals. On Tuesday, Citic International Financial Holdings and its parent, Citic Group, said that Citic Group was looking to replace Lehman Brothers as the financial adviser for its ongoing $1.6 billion privatisation of CIFH, and yesterday they announced that Morgan Stanley had been appointed for the job. They said the decision to change advisers was made at the recommendation of Lehman and was a direct result of the Hong Kong regulators having restricted four entities of Lehman from dealing with clients and assets.

There have been no other formal announcements of mandate transfers so far, but bankers at other firms are said to be circling M&A deals that have already been announced and where Lehman was a sole adviser to either party. In those cases, the incoming adviser may get away with a minimum of work in return for a healthy fee. In Asia-Pacific, Lehman is the sole adviser to Temasek on its recently announced $497 million investment in Li & Fung. It is also on the sell side on Vedanta's $2.6 billion acquisition of bankrupt US copper miner Asarco and IndiaÆs GMR Infrastructure's acquisition of 50% of InterGen for $1.1 billion. Among its joint mandates, it is advising (together with Merrill Lynch) China Unicom on its $6.3 billion merger with China Telecom.

Barclays said it will buy LehmanÆs North American investment banking and capital markets businesses as well as supporting infrastructure for $250 million in cash, subject to approvals by the US bankruptcy court and relevant regulators. The businesses are estimated to have assets of $72 billion and liabilities of $68 billion. It will also acquire LehmanÆs New York headquarters and two data centres for about $1.5 billion, which is said to be close to the current market value.
¬ Haymarket Media Limited. All rights reserved.
Share our publication on social media
Share our publication on social media