Lehman Bros. Holdings Inc., the fourth-largest U.S. securities firm, agreed Tuesday to buy asset manager Neuberger Berman Inc. for $2.63 billion.
Lehman would pay $41.48 a share in cash and stock for the 64-year-old firm. Neuberger Chief Executive Jeffrey Lane, 61, would become a vice chairman of Lehman. Lane was Lehman CEO Richard Fuld Jr.'s colleague at Shearson Lehman Bros. in the 1980s.
Acquiring New York-based Neuberger, which oversees $63.7 billion in investor assets, would provide Lehman with new sources of revenue as a three-year bond rally wanes. Debt underwriting and trading accounted for 63% of Lehman's second-quarter revenue. Fuld said he expected the acquisition to lift revenue from Lehman's client services unit to 21% from 13% of the total.
Lehman would pay about 4.5% of assets for Neuberger, whose average account is worth $3.7 million. That's higher than the 4.1% paid by Alliance Capital Management for Sanford C. Bernstein & Co. in 2000, according to Prudential Equity Group analyst David Trone.
Fuld "paid up for the Neuberger name, prestige and culture," Trone wrote. "We are not sure these 'intangibles' will hold much of their value once Neuberger loses its independence."
Lehman shares fell 80 cents to $63.70 in New York Stock Exchange trading. Neuberger shares, up 20% since talks with Lehman were disclosed in late June, slid 29 cents to $40.15, also on the NYSE.
The acquisition would bring Lehman's total assets under management to more than $100 billion. That still would be a fraction of what its biggest rivals, such as Merrill Lynch & Co. and Morgan Stanley, oversee.
Neuberger Berman was founded in 1939 by Roy Neuberger and Robert Berman. It was one of the first firms to offer mutual funds that didn't charge transaction fees.
Neuberger, a well-known modern-art collector who turned 100 on Monday, disposed of his stake four years ago when the company went public.