The chief executive of Barclays and the president of Lehman Brothers just announced an acquisition of a part of Lehman by Barclays, according to someone present. It was unclear exactly what Barclays was acquiring but earlier news reporters suggested it would be the broker-deal arm of Lehman.
Barclays Bob Diamond and Lehman’s Bart McDade took to the second floor of Lehman to speak to employees.
“It’s time to dominate,” McDade announced.
They are apparently now going floor to floor making the announcement.
“They just announced they are keeping the trading platform in New York,” a person familiar with the matter said.
Update: Lehman employees have set up LaidOffByLehman.com, which is also reporting the tour by McDade and Diamond.

One of the most interesting developments in the Lehman debacle must be the abrupt departure and the return (which followed hard upon) of Barclays as a Lehman suitor.
Hazarding a guess, one might think that Barclays was trying to stare down Paulson, pressing for federal backing of the potential toxic waste Barclays would have to take on in a Lehman purchase. After all, Jamie got the government to blink, why shouldn’t our friends from across the pond? That didn’t work so well. Bailing out a major counter-party and prime broker (and coping with the moral hazard problems that brings) was one thing, supporting a foreign buyer was a no-go and I suspect not a small number of risk arb managers who figured that out on Friday did fairly well today.
Still, The Wall Street Journal points out that Paulson was in no mood to nursemaid another transaction no matter who the buyer. Our own John Carney makes the case for a tempestuous and unpredictable Paulson. And for Barclays’ part, well, they look a bit silly now that their bluff bombed. But then, it tends to illuminate the desperation Lehman must feel that they seem to be ignoring all the bluster and continue to act as if nothing at all has happened now that the Brits are back bidding.
John Mack escapes with my favorite quote from the morass that is Lehman’s disposition: “If we’re going to do this deal, where does it end?”

It is rather shocking (but not) to see how quickly the financial press turns on its former heroes. Truly, very fair weather friends, the press. To wit: Dick Fuld’s fall from grace with the Financial Times as seen in their headlines and prose.
Smart survivors of the carnage

“Dick Fuld, Lehman Brothers chief executive, has emerged triumphantly from the squeeze….”
- FT November 5, 2007
Lehman rides out credit crisis

“Analysts had expected Lehman to earn $1.42 a share. But the diversification strategy of Richard Fuld, chief executive, helped avert the predicted earnings drop….”
- FT December 14, 2007
A fighter on the ropes

- FT June 14, 2008
Dick Fuld, the executioner
- FT June 17, 2008
On Wall Street: Be they ever so humble, but the times they are a-changing

“You know the Street has serious self-esteem issues, when even Dick Fuld, one of the toughest bankers around, has to come out with a mea culpa for Lehman Brothers’ losses.”
- FT June 20, 2008
Lehman chief to forgo annual bonus

- FT June 27, 2008
Fuld faces a tough fight to save his legacy

“Dick Fuld’s reputation as a titan of Wall Street….”
- FT September 10, 2008
Hadron Collider meets Dick Fuld

“…Lehman Brothers chief Dick Fuld was subjected to the laser-beam treatment….”
- FT September 11, 2008
Hubris – is thy name Richard Fuld?

- FT September 14, 2008
Denial disguises Lehman reality

- FT September 15, 2008
A tragedy of hubris and nemesis

- FT September 15, 2008
Ah yes. From smart fighter, triumphant, to humble tower of strength, to executioner, to tough banker to egotistical maniac. We love our financial heros strong, indelible and tough. Until we don’t anymore.

Best observation:
It might be a good idea to expand the maximum check-box answers on the form for:
Estimated Number of Creditors (Over 100,000).
Estimated Assets (More than 1 Billion).
Estimated Liabilities (More than 1 Billion).
Potential Inaccuracies:
“Does the debtor own or have possession of any property that poses or is alleged to pose a threat of imminent and identifiable harm to public health or safety?” Yes [ ] No [X].
(Though, I suppose it is possible Dick Fuld has been fired, and this is why his ego is not triggering this provision).
Most Potentially Screwed Creditors (though note that some of these may be listed in their capacity as trustees for the debt issues, not as creditors):
CitiBank, Bank of New York (jointly): “Approximately $138 billion” in “Bond Debt.”
Bank of New York (solely): $17 billion.
Aozora Bank, Ltd., Tokyo: $463 million.
Country Other Than The United States With Most Potentially Screwed Creditors:
Japan- about $1.6 billion. (First the real estate in the 80s, now this, HAH!)
Best “That About Sums It Up” Figures:
Total Assets: $639 billion. (AHEM!)
Total Liabilities: $613 billion.
Most Obvious Equity Pain:
Name / % of Common Stock Held
AXA and related parties / 7.25%
ClearBridge Advisors, LLC and related parties / 6.33%
FMR LLC and related parties / 5.87%
Method For The Very Broker-Dealish Lehman To Avoid Chapter 7?
File at the holding company level?

Employees at the Lehman Brothers in midtown Manhattan are described as “crying, angry, distraught” by a witness. They’ve been filing out of the building this evening.
The bank was said by a person familiar with the matter to be close to confirming that it will file under Chapter 7 of the bankruptcy code, which means the firm will be liquidated.
However Robert Peston at the BBC says it will be Chapter 11 rather than Chapter 7. “Preparations have been made for Lehman Brothers, the substantial US investment bank, to obtain protection from its creditors under US Chapter 11 insolvency procedures,” he writes.
Meanwhile, talks continue at the New York Federal Reserve. With the two major buyers for Lehman Brothers, Barclays and Bank of America, having walked away from deals this afternoon, the talks now are focussed on limiting the damage from Lehman’s collapse. These talks include consideration of a merger between Merrill Lynch and Bank of America, hoping to stop the “who is next” question from toppling another Wall Street firm.

Barclays has walked away from the negotiations on the fate of beleaguered Lehman Brothers, balking at the government’s refusal to provide guarantees that would shield Barclays from Lehman losses. Bank of America continues in talks, sources say.
We hear that Lehman CEO Dick Fuld is complicating negotiations, saying at first thatthe deals being worked out at the New York Federal Reserve would not benefit Lehman shareholders. He had threatened to pull Lehman out of talks and keep his investment bank independent. Many believe that survival as an independent entity is simply not feasible for Lehman, however. They predict that if a buyer or buyers for all or a large part of Lehman cannot be found the firm will have to be liquidated.
Today Fuld seems to have largely given up on autonomy for Lehman. He is said to favor a deal with Barclays in the lead and a government guarantee supporting the transaction. This position may risk alienating Bank of America.
Please keep in mind that the situation is very fluid, with deals apparently being reached and then collapsing.
Lehman Heads Toward Brink as Barclays Ends Talks [New York Times]
Barclays Ends Talks to Buy Lehman; BofA Still Involved [CNBC]
Barclays Walks from Lehman Deal [Wall Street Journal]

We understand that a deal has been reached to divide Lehman Brothers into two entities, with a “bad bank” taking the toxic, real-estate assets amounting to around $85 billion. The deal will be financed without any government backing. Lehman chief executive Dick Fuld will resign.
Bank of America will take the lion’s share of the good assets of Lehman, with Barclay’s and Nomura playing a role as well. An international consortium of financial firms will inject capital for the deal, preventing Lehman’s assets from flooding the market in a fire sale. Many US based firms have not played a large role, in part because they are facing their own financial challenges.
Dick Fuld’s resignation was demanded by Bank of America, which played a brinkmanship role in negotiations, threating to let Asian markets open tomorrow without a deal in place, a person familiar with the matter says. Many believe that a Monday market opening without a resolution would effectively have been the end of Lehman Brothers and could have spread financial turbulence to other securities firms. (On a side note: apparently, Japanese markets will be closed Monday morning for a holiday.)
Fuld is said to have taken tonight’s developments very badly. He does not believe that the situation is as desperate as others on Wall Street believe it is, and may be trying to negotiate an alternative deal, we’re told.
Of course, the situation remains fluid and there is still a possibility that the deal reached tonight could fall apart. Many of the details remain to be worked out, although there is widespread agreement on the outline of this deal.

Update: The New York Post is reporting that Lehman was taking offers for its investment management business today.

The notion of a planned sale of its asset-management operation, which is anchored by Neuberger Berman, is alive because Lehman plans on using the offers, which were submitted yesterday, to help assign a value to the entire bank, sources said.

The Wall Street Journal reports that “people familiar with the situation” say a solution to the Lehman Brothers problem could be reached as soon as tonight.

On Saturday, the main task ahead in discussions being led by the Federal Reserve is identifying whether a so-called “bad bank” structure could be designed to hold Lehman’s souring assets. That issue is now seen by people familiar with the situation as the key stumbling block to completing a deal, especially if Treasury and Fed officials keep digging in their heels on opposition to a government-backed rescue.
Potential buyers such as Bank of America Corp. and Barclays PLC are loathe to take on Lehman’s bad assets, which are seen as an immovable object to getting a deal done, according to people familiar with the situation.

Lehman Deal Could Come Tonight As High-Level Talks Continue [WSJ]