Lehman a big gamble for any buyer
NEW YORK (Reuters) - Any buyer of Lehman Brothers Holdings Inc would likely be taking a big gamble even if they picked it up at a fire sale price.
Lehman's shares plunged 45 percent on Tuesday and touched their lowest level since October 1998 on growing concerns that the fourth-largest Wall Street investment bank won't be able to raise the capital it desperately needs to survive the global credit crisis.
The firm's market capitalization fell to a mere $5.4 billion, valuing the whole company at even less than its asset management business, which analysts have said could be worth around $8 billion.
But despite the plunging price and attractive businesses like its Neuberger Berman wealth management unit, Lehman remains a difficult company to value. That is largely because of the uncertainty about the value of troublesome assets such as commercial real estate related holdings, experts said.
It will take someone with deep pockets and possibly government backing to attempt a takeover, as in the case of JPMorgan Chase & Co's purchase of Bear Stearns earlier this year, said Michael Farr, president of investment management company Farr, Miller & Washington.
"It's not so much the price as we found out with Bear Stearns," Farr said. "It's what are you really buying -- what sort of potential liabilities, what type of counterparty risk could you be forced to assume. That is anything but transparent."
Lehman has already taken $7 billion in credit-related write-downs and losses since the start of the global credit crisis. It has raised about $12 billion in capital this year through common equity, preferred stock and convertible securities offerings, but analysts say that may not be enough.
The company had a second-quarter loss of $2.8 billion, or $5.14 per share. Analysts on average expect a third-quarter loss of $3.04 per share, according to Reuters Estimates.
On Monday, Merrill Lynch analyst Guy Moszkowski increased his projected loss for Lehman to $6.50 per share from $3.94, saying the write-down could total $7.1 billion. Ladenburg Thalmann analyst Richard Bove increased his estimate to $3.17 per share from $2.32.
Late on Tuesday, Lehman announced that it will report its third-quarter results and "key strategic initiatives" on Wednesday at 7:30 a.m. in New York (1130 GMT).
CAPITAL EFFORTS
Lehman has considered selling all or a part of its asset management business and disposing of commercial real estate related assets, sources have previously said.
Dow Jones Newswires reported on Tuesday that talks on a possible investment from Korea Development Bank broke down, citing the chairman of South Korea's top securities regulator, Jun Kwang-woo.
But a spokesman for the Korean regulator denied the report, telling Reuters that Jun never made the statement.
The Dow article also quoted an unnamed government official as saying KDB had decided not to invest in Lehman. Continued...
