A group of Lehman Brothers executives won a bankruptcy auction Wednesday for Lehman Brothers’ investment management division, including Neuberger Berman, beating a $2.15 billion bid from private equity firms Bain Capital and Hellman & Friedman.
The amount of the management group’s bid was not disclosed. Lehman agreed to pay Bain and Hellman & Friedman a break-up fee of $52.5 million if their bid was not chosen in the auction. The fee was reduced from $70 million last month. Bankruptcy court still must approve the deal, and a hearing is set for Dec. 22. Objections to the transaction can be filed before the sales hearing.
The group, which includes portfolio managers and other senior professionals, will create a new, independent company called Neuberger Investment Management. The company will include Neuberger, fixed income and private equity fund of funds, secondaries and co-investment, as well as start-up private equity businesses including Lehman’s debut infrastructure fund, which was targeting $1 billion.
Management will control 51 percent of the company and Lehman Brothers Holdings will retain a 49 percent stake.
George Walker, global head of investment management for Lehman, will be chief executive of the new company, and Joe Amato will continue to lead Neuberger.
The bid from the management group was chosen because it offered “greater value” and “certainty of closing”, Jim Fogarty, a managing director with turnaround firm Alvarez & Marsal, said in a statement. Fogarty serves as Lehman’s chief operating officer.
Bain and Hellman & Friedman made their bid in September. The Carlyle Group also said it wanted to make an offer but said the bankruptcy auction process was locking in Bain and Hellman & Friedman.