Neuberger gets set to buy Lehman's trust companies

Thomas Coyle

24 July 2009

Manager to re-acquires estate-planning capabilities it had under old regime. Neuberger Berman, formerly the asset-management division of failed investment bank Lehman Brothers, has agreed to buy Lehman's trust companies. The move gives Neuberger Berman the wherewithal to provide trust, estate-planning and related services to its wealth-management and smaller institutional clients -- and do it using entities and personnel it's familiar with.

Ideal home

Neuberger Berman will follow Lehman's practice of referring to its trust companies in the singular for branding purposes. Lehman Brothers Trust Company's president Robert Laughlin will lead Neuberger Berman Trust Company once the deal is completed -- probably before this year is out.

"We are looking forward to continuing our partnership with the talented professionals of the Trust Company, working together to meet the needs of our clients," says Neuberger Berman's CEO George Walker. "We and our clients have seen firsthand the value the Trust Company provides, making this acquisition a logical and important step for our firm."

New York-based Lehman Brothers Trust Company gives Neuberger Berman a national licensed to provide trust services throughout the U.S.; Wilmington, Del.-based Lehman Brothers Trust Company of Delaware gives it access to coveted "Delaware trust" asset-protection capabilities.

Linking up with Neuberger Berman "creates an ideal home for the Trust Company," says Laughlin. "We look forward to continuing to draw upon Neuberger Berman's considerable investment strengths and a shared dedication to providing the highest level of client service."

Past masters

About 200 of Neuberger Berman's executives and portfolio managers -- led by Walker, who is a first cousin of forty-third U.S. president George Bush -- recently acquired 51% of the firm from the holding company established to disperse Lehman's assets for the benefit of its creditors.

Private-equity firms Bain Capital Partners and Hellman & Friedman came out with an offer of $2.15 billion for the asset manager just weeks after Lehman's collapse in September 2008. But with markets in freefall, they were in U.S. Bankruptcy Court within a few months looking for a judge's OK to pay less. In a subsequent court-run auction, the Neuberger Berman management group edged out the venture firms' revised-down bid with an offer that came to about $922 million after adjustments.

Politically connected private-equity giant Carlyle was sniffing around Neuberger Berman at around the same time, but it dropped out of contention just before the early-December deadline for bids rolled around.

Neuberger Berman, at root a value investor, isn't saying what it plans to pay Lehman's debt holders for the trust businesses.

New York-based Neuberger Berman is 70 years old. Lehman Brothers acquired it in 2003 for $2.6 billion -- just four years after its managers and employees hauled in approximately $334 million from an IPO of 15% of its common stock. It managed $158 billion at the end of June 2009 -- roughly 20% of that for high-net-worth clients, 60% for institutions; the rest is handled by unaffiliated intermediaries.

Neuberger Berman's co-founder Roy Neuberger, who is retired, celebrated his 106th birthday a few days ago. -FWR

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