Lehman straits may spur hostile takeover: analyst

By Dan Wilchins

NEW YORK (Reuters) - Lehman Brothers failed to sell a large stake to Asian investors, a report said, and such failures may open the door to a hostile takeover of the investment bank, an analyst wrote.

A newspaper report said Lehman sought to sell up to a 50 percent stake to China's biggest brokerage, CITIC Securities, or state-owned Korea Development Bank, but the two Asian companies walked away after deciding the asking price was too high.

That represents a failure for a bank seeking to assuage investors concerned about its $60 billion of mortgage assets. The bank has looked at selling at least a part of its asset management unit to private equity firms, and is looking at selling commercial real estate assets.

So far, nothing has been announced. Lehman spokeswoman Monique Wise declined to comment on Thursday.

Richard Bove, an analyst at Ladenburg Thalmann, wrote: "The major question related to this company at the moment is, 'Why isn't anything happening?'"

Bove said it appears that management's perception of Lehman's value is much higher than investors'.

That disconnect leaves Lehman vulnerable to a hostile takeover, the analyst said. And the potential for a hostile takeover makes the company's shares worth buying, he added.

Another analyst who sees value in Lehman is Citigroup's Prashant Bhatia. Bhatia rates the company's shares "buy" even though he cut his estimates for Lehman's third-quarter results on Thursday to a loss of $3.25 per share from his prior estimate of a loss of 41 cents per share. He said he expects $2.9 billion of asset-related write-downs for the bank, but that does not mean Lehman needs more capital.

Even under the most stringent rating agency guidelines, "we anticipate that Lehman can absorb over $3 billion of after-tax losses without adding more common equity," Bhatia wrote.

He also cut estimates for the broader investment bank sector.

HIT HARD

The Financial Times reported on Thursday that Lehman spoke to CITIC and KDB in the first week of August but the talks fell through.

"That's not a good sign," said Mike Holland, chairman of Holland & Co, which oversees more than $4 billion of investments. "It reminds people that fewer potential investors are interested."

CITIC told Reuters it had held no formal talks about buying a stake in Lehman. A Lehman spokeswoman and a KDB spokesman declined to comment.

A KDB official, who declined to be identified, said the South Korean bank was scaling back its overseas assets and staff to reduce exposure to volatile foreign markets.