Lehman Brothers has announced it will sell a majority stake in its asset management, spin off most of its real estate assets and cut its dividend substantially in an attempt to shore up its balance sheet.
“This is an extraordinary time for our industry, and one of the toughest periods in the firm’s history,” says Lehman’s chairman and CEO, Richard Fuld.
The investment bank will sell an approximately 55% stake in a subset of its investment management division. The subset of businesses includes the asset management, private equity and wealth management businesses but excludes its middle market institutional distribution business and the firm’s minority stakes in external hedge fund managers.
Lehman also intends to spin off to its shareholders US$25 billion to $30 billion of its commercial real estate portfolio into a separate publicly- traded company, Real Estate Investments Global, in the first quarter of 2009.
The concentration of positions in commercial real estate-related assets has become a significant concern for investors and creditors, the brokerage says. Lehman believes that it is in the best interests of all its constituents to separate these assets from the rest of the firm.
And Lehman will reduce its annual dividend to $0.05 per share from $0.68 per share, enabling it to save $450 million annually.
The investment bank also announced a preliminary third-quarter loss of $3.9 billion, driven primarily by gross mark-to-market adjustments stemming from write-downs on commercial and residential mortgage and real estate assets.
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