Lehman: Rumors of Hostile Takeover

Aug.21.08 | About: Lehman Brothers (LEH)

Lehman Brothers (LEH) seems to have become the subject of a rumor that alludes to the possibility of the New York brokerage firm becoming a target of a hostile takeover.

According to suggestions from Ladenburg Thalmann’s analyst, Dick Bove: Lehman could be bought by a party with good capital to hold on to the firm’s distressed assets until they regain value.

Bove also said that the party “could wait until assets mature before they sell them, and could hence sell Lehman’s investment management unit Neuberger Berman for more than the value of the whole company and then basically own Lehman Brothers for nothing”.

Since it can be a bit boring and way too depressing to continually trudge out bad news, the fact is, this is not the first time Lehman Brothers has been subject to acquisition rumors. As we recall, in June of current fiscal year, after the company's 2Q’08 unexpectedly large quarterly loss, Blackrock Inc. (NYSE:BLK), which bought a stake in Lehman, was actually repeatedly mentioned on CNBC as a potential acquirer of the whole firm.

My point is, Bove’s takeover speculation — while it offers his perspective, which includes cutting Lehman’s price target on the stock to $20 from $23 previously  —  is certainly nothing new. In addition, watching LEH’s shares  there was no immediate impact once this rumor hit the wires.

Whether the global financial services firm will get acquired or not remains to be seen. However, the reality is the Street continues to release bleak outlooks on the brokerage sector, predicting more mortgage-related write-downs, including Lehman Brothers, , Goldman Sachs Group Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS).

Separately, Dealbreaker reported today that two top executives are leaving Lehman Brothers. Rich McKinney, who was the head of American securitized products business for Lehman, and Ted Janulis, the head of the mortgage capital division, plan to leave the company.

McKinney is taking up a buyside position with another firm while Janilus is said to be considering his options, including possibly retiring.