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Lehman to Sell Neuberger Berman Stake for $1.5 Billion

Lehman Brothers Holdings Inc. plans to sell its equity stake in Neuberger Berman to the investment-management affiliate for as much as $1.5 billion over time, according to a court filing.

The transaction includes a series of redemptions of Lehman’s preferred equity in the firm and possibly a repurchase of Lehman’s common shares, Lehman said today in a filing. The preferred stock would bring about $845 million, while common-stock repurchases would bring as much as $450 million, it said. Lehman’s total from the deal includes $160 million already received in dividends and tax distributions.

Parts of the deal will depend on Neuberger Berman’s getting enough financing to buy the shares, Lehman said.

Lehman, which filed the biggest bankruptcy in U.S. history in September 2008, won court approval three months later to sell Neuberger Berman for no cash to the firm’s managers, who said their deal had more certainty in the credit crisis than a bid from private-equity firms Bain Capital LLC and Hellman & Friedman LLC.

Lehman took $813.8 million in new dividend-paying preferred shares, plus common stock representing a 49 percent stake in the business, it said in a 2008 court filing. Executives of Neuberger Berman, the best-known part of the defunct firm’s investment management division, owned the remaining 51 percent.

Positive Development

“This is a positive development for all parties -- Neuberger Berman’s employees and clients as well as the estate and its creditors,” Neuberger Berman chief executive officer George Walker said in an e-mailed statement.

Martin Bienenstock, who heads the restructuring group at the law firm Dewey & LeBoeuf LLP, said at the time of the sale it was the deal of a lifetime for the managers, who got 51 percent of the common stock for no cash, and removed the firm from the Lehman bankruptcy.

Bain and Hellman had the right to walk away from the deal if stock prices dropped below a certain level before the deal closed.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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