A group consisting of portfolio managers, the management team and senior professionals will take a majority stake in Neuberger Berman and the fixed-income and alternative asset management businesses of the Lehman Brothers investment management division after outbidding a private equity consortium of Bain Capital and Hellman & Friedman.

The transaction will create a new independent investment management company to be called Neuberger Investment Management comprising businesses that managed some USD160bn at the end of November. The businesses ran asset exceeding USD230 three months earlier.

The management group will control 51 per cent of the new company with the bankrupt Lehman Brothers Holdings retaining a 49 per cent stake. Final bankruptcy court approval is expected later this month, with the transaction set to close in the first quarter of 2009.

The management bid was selected as the winner in a bankruptcy court auction held today, having topped the Bain Capital and Hellman & Friedman bid that appeared to be a done deal in September but in the end resulted in an auction process against the backdrop of continuing chaos in the financial markets.

'Bain Capital and Hellman & Friedman are two of the premier private equity firms in the world,' says George Walker, global head of investment management for Lehman Brothers, who bcomes chief executive of Neuberger Investment Management. 'They played a key role at a critical time in this process. We have deep admiration for both firms.'

The management bid was selected because it offered greater value and certainty of closing, according Jim Fogarty, chief operating officer of Lehman Brothers Holdings and a managing director with Alvarez & Marsal, a professional services firm that has been overseeing the bankrupt investment bank and working to maximise value for its creditors.

The acquisition involves the Neuberger Berman business, consisting of primarily equities products and services and mutual funds aimed at high net worth and institutional clients, Lehman Brothers Asset Management, which offers fixed income, commodities, and quantitative portfolio management, and the private funds investment group, which runs funds of hedge and private equity funds, secondary private equity and co-investment. Several start-up private equity businesses, including infrastructure and mezzanine debt, are also included.

Founded in 1939 by Roy Neuberger, Neuberger Berman has more than 25 portfolio teams in its private asset management platform and offers separately managed accounts, mutual funds and advice to high net worth and institutional investors.

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

Joe Amato, who will continue to lead Neuberger Berman, the new company's largest operating unit, says: 'Neuberger Berman's culture of excellence has never been stronger and will continue to be a key part of how we deliver for our clients and a key competitive advantage in the investment management world.'

Fogarty says: 'We regard this transaction as the best outcome for the creditors of Lehman Brothers. Neuberger Investment Management has a top-notch team in place that knows the business and is highly motivated to deliver value.'

Allen Thorpe, a managing director with Hellman & Friedman, expressed disappointment not to win the bidding but wished Walker and the management team well. Phil Loughlin, a managing director with Bain Capital, says: 'We have utmost respect for the company, its senior management team and portfolio managers and remain confident in Neuberger Investment Management's continued success.'

       

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