Management beats PE firms in bid for Nueberger Berman

The auction for Lehman Brothers Holdings Inc.’s prized asset management unit Neuberger Berman has been won by a team consisting of Neuberger’s management, the company announced last week.

The bid by Neuberger’s management beat the offer made by private equity firms Bain Capital and Hellman & Friedman, which valued the asset management firm at $2.15 billion.

The sales process for Neuberger had been drawn out. Lehman originally put a majority of the prized asset management arm up for sale in August. The unit, one of Lehman’s best performing assets, drew interest from a number of private equity bidders, including Kohlberg Kravis Roberts & Co., TPG, Silver Lake, The Blackstone Group and Clayton Dubilier & Rice, sources previously said.

The Carlyle Group

, together with former Neuberger Berman CEO Jeffrey Lane, previously said they were interested in Neuberger. But it is unknown if they were part of the bidding process, which ended early last week.

The auction was held at the law offices of Weil Gotschal & Manges, which represents Lehman in their Chapter 11 bankruptcy proceedings. Lehman Brothers Holdings Inc. filed for bankruptcy protection in mid-September after trying to finance too many risky assets with too little capital.

Under the winning bid’s structure, management will own 51% of the company and Lehman’s creditors will control the remainder.

“We will hold that (interest) until we can do a plan of reorganization, and at that time, would distribute these interests to our broad creditor base,” said Jim Fogarty, chief operating officer of Lehman Brothers. Those interests would become tradable securities and could even be listed on an exchange at some point, he said.

U.S. Bankruptcy Judge James Peck must still approve the selection. A hearing is scheduled for Dec 22 at the U.S. Bankruptcy Court for the Southern District of New York.

Founded in 1939 by Roy Neuberger, the business had $160 billion assets under management as of Nov. 30, it said.

“We’re pleased this will be co-owned and controlled 51% by our senior professionals” said George Walker, who will be CEO of Neuberger Investment Management, the entity which owns Neuberger. —Megan Davies, Reuters