Barclays announces agreement to partly acquire Lehman Brothers


The Board of Barclays announces that Barclays has agreed, subject to US Court and relevant regulatory approvals, to acquire Lehman Brothers North American investment banking and capital markets operations and supporting infrastructure. The transaction will create a premier integrated global bulge bracket investment banking company with a leading presence in all major markets and across all major lines of business including: equity capital markets, debt capital markets, mergers and acquisitions, commodities trading and foreign exchange.

Barclays will acquire trading assets with a current estimated value of 40bn (US$72bn) and trading liabilities with a current estimated value of 38bn (US$68bn) for a cash consideration of 0.14bn (US$0.25bn). Barclays will also acquire the New York headquarters of Lehman Brothers as well as its two data centres at close to their current market value.

In response to this opportunity, certain Barclays shareholders have expressed support for the transaction and interest in increasing their shareholdings in Barclays. The Board of Barclays expects these discussions to lead to a subscription of at least 0.6bn (US$1bn) of additional equity. The proposed transaction with Lehman Brothers and the additional equity would result in an enhancement of Barclays earnings and capital ratios.

1. Transaction Structure

The Lehman Brothers operations to be acquired in the transaction (the 'Acquisition') have approximately 10,000 employees, trading assets currently estimated to have a value of 40bn (US$72bn), and liabilities currently estimated to have a value of 38bn (US$68bn). The Lehman Brothers operations include Lehman Brothers North American fixed income and equities sales, trading and research and investment banking businesses (the 'Lehman Brothers businesses'). Lehman Brothers will receive 0.14bn (US$0.25bn) in cash as consideration for the Lehman Brothers businesses.

Barclays has also agreed to acquire Lehman Brothers New York Head Office at 745 Seventh Avenue and two data centres in New Jersey for close to their current market value, estimated at 0.8bn (US$1.5bn). The combined consideration totals some 1.0bn (US$1.75bn).

The Acquisition is subject to a number of conditions including the approval of the United States Bankruptcy Court for the Southern District of New York. Lehman Brothers is filing an emergency motion with the Bankruptcy Court to seek a hearing to obtain approval for the Acquisition. The Acquisition is also subject to certain usual conditions including receipt of necessary regulatory approvals and US antitrust clearances. The agreement for the Acquisition may be terminated if it is not completed by 24 September 2008.

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