Three days after Barclays, the British bank, failed to reach a deal that would have salvaged Lehman Brothers, it announced Wednesday that it had struck an agreement to buy the broken investment firm’s core capital markets businesses for the fire-sale price of $1.75 billion — far less than Lehman had hoped for.
The accord, announced in London on Wednesday, could save 8,000 to 10,000 Lehman jobs and allow Robert E. Diamond Jr., the president of Barclays, to attain his longtime goal of expanding his bank’s reach in the United States.
“If you want to transform yourself from a minor player into a major firm, this is the time to do it,” said Roger Nightingale, a global strategist at Pointon York in London. “It’s so difficult to do that in an ordinary period.”
“Barclays have long been trying to establish themselves on Wall Street and Lehman’s demise offers an opportunity they’re not willing to miss,” said Angus Campbell, head of sales at Capital Spreads in London.
A statement from Barclays on Wednesday confirmed the price of $1.75 billion. “This is a once in a lifetime opportunity for Barclays,” said Mr. Diamond.
The deal, which also includes Lehman’s Midtown Manhattan headquarters building and two data centers — accounting for $1.5 billion of the deal’s value — must be approved by a judge overseeing Lehman’s bankruptcy proceedings. Barclays said it expected to raise $1 billion in equity to support the deal.
Lehman, staggered by losses on its commercial and residential real estate assets, filed for bankruptcy protection of its holding company Monday morning.
Barclays is taking on Lehman’s large fixed-income trading operations, while avoiding a purchase of the large portfolio of toxic real estate assets that forced Lehman into bankruptcy, people involved in the process said.
Lehman is still trying to sell the bulk of its investment management division by Thursday or Friday. Two private equity groups, Bain Capital and Hellman & Friedman, are seen as the most likely buyers.
Lehman had hoped to get as much as $5 billion for its investment management business, though it may not even receive that amount after the bankruptcy filing. If it gets the full $5 billion and $1.75 billion from the sale of its capital markets unit, the combined amount would value Lehman at around $10 a share — the same fire-sale price at which Bear Stearns was sold to JPMorgan Chase.