World financial news

Lehman Brothers Holdings Inc has made a tough call by deciding to auction a big piece of its investment management unit, seen as one of its crown jewels. Now, it could face an even harder task — getting a good price for it.

The fourth-largest U.S. investment bank has struggled to raise capital to offset write-downs due to the credit crisis, and some bankers said Lehman’s plan to sell a majority stake in its valuable business, including asset manager Neuberger Berman, is a sign of the desperate straits it is in.

“Neuberger Berman is a first-class property that people will be interested in. You certainly have a stressed seller who needs capital. That presents interest plus opportunity,” said Eric Weber, chief operating officer of Freeman & Co, a merger advisory firm focused on financial services. “People smell blood in the water.”

Lehman released its quarterly results and plans for raising capital about a week earlier than planned, after investors sent its stock reeling on concerns it won’t be able to raise enough funds and its survival might even be in question.

It posted a quarterly loss of $3.93 billion on Wednesday and said it plans to shed some assets, including selling about 55 percent of a portion of the investment management division payday loans in 1 hour. That includes Neuberger and the private equity and wealth management businesses. Experts say the unit overall could be worth around $8 billion.

The division, which is headed globally by George Walker, a former Goldman Sachs partner and second cousin of U.S. President George W. Bush, is a steady source of income for Lehman and the decision to sell a stake is not a happy choice.

The company had $273 billion in assets under management as of August 31, with $98 billion in equity, $93 billion in fixed income, $44 billion in money markets and $38 billion in alternative investments.

That makes it roughly the same size as Wachovia Corp’s Evergreen Investments, with about $245 billion in assets under management, but it is far smaller than BlackRock Inc’s $1.428 trillion, both as of June 30. 

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