September 17, 2008 / 1:14 PM / 11 years ago

Barclays says could buy more Lehman assets

NEW YORK/LONDON (Reuters) - British bank Barclays Plc (BARC.L), after striking a $1.75 billion deal to purchase Lehman Brothers’ LEH.N LEH.P core U.S. business, said it could buy some Lehman businesses in Europe or Asia and agreed to provide bankruptcy financing to the troubled investment bank.

The Lehman Brothers booth on the trading floor of the New York Stock Exchange, September 16, 2008. REUTERS/Brendan McDermid

John Varley, Barclays chief executive, said the bank had “opportunities but not the obligation” to buy more Lehman assets, after the U.S. investment bank filed for bankruptcy protection on Monday.

Lehman also filed court documents on Wednesday seeking approval for $450 million in debtor-in-possession financing from Barclays, which would allow Lehman to continue operating as it hurries to close the sale with Barclays.

“We now have the opportunity, and it’s an opportunity that we’re looking at quickly and seriously, to see what else might fit with the businesses we’re developing around the world,” Varley told analysts on a conference call.

Bob Diamond, head of Barclays Capital, added: “It would most typically be around those areas where Lehman has strong positions and BarCap has a weak one, so mostly around equities and equity capital markets business.”

He said an example would be Lehman’s cash equities, where he “wouldn’t want to miss the opportunity to add some of the talent from the UK and Europe to that (U.S.) team.”

Meanwhile, CNBC is reporting that Lehman may sell its investment management division as soon as today.

Barclays’ U.S. purchase, which is subject to bankruptcy court approval, includes Lehman’s North American sales, trading, and research and investment banking businesses, as well as its midtown Manhattan headquarters and two New Jersey data centers.

Barclays purchase could save about 10,000 jobs at Lehman. <ID:nN16443309>

According to court documents, U.S. employees of the firm will have the opportunity to continue their employment with Barclays on the same terms through December 31, 2008 and Barclays will assume an estimated $2.5 billion in liabilities linked to the potential cost of severance for Lehman employees.

If the deal does not go through, Lehman is seeking court approval to pay Barclays a break-up fee of $100 million plus up to $25 million for expenses, according to court documents.

For Barclays, the deal will have an immediate positive impact on economic profit, is expected to add to earnings in the first year, and will provide a “very high” return on investment, Varley said.

The deal would also lift Barclays’ capital ratio, even before the bank completes a planned capital injection alongside the deal, because of a negative goodwill adjustment from the deal amounting to about $2 billion after tax.

The bank said existing shareholders had expressed support for the deal and were expected to buy additional equity of at least 600 million pounds ($1.1 billion) into the bank.

In court filings, Lehman said Barclays has also agreed to buy 50 percent of each position in residential real estate mortgage securities at its Lehman Brothers Inc unit.

Reporting by Steve Slater in London, Emily Chasan and Dan Wilchins in New York; Editing Bernard Orr

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