Barclays in swoop for the US arm of Lehman

But sources close to Barclays said that there were no immediate plans to buy Lehman Europe, the equivalent business based in Canary Wharf which employed 4000 investment bankers.

Barclays chief executive John Varley said: "Nothing's ruled in or out but we feel that we are more likely to take on people rather than businesses outside the US."

Barclays becomes one of Wall Street's top three investment banks overnight.

On Sunday Barclays pulled out of talks to buy the whole of America's fourth-largest investment bank, which was then forced to go into Chapter 11 bankruptcy protection.

Varley said: "This was a classic opportunity which would not have come along had it not been for the crisis in the market. We much prefer this deal to the one we were discussing over the weekend. This time we have been able to choose exactly what parts of Lehman we want."

"This is a once-in-a-lifetime opportunity for Barclays," said its president and head of its investment banking business Bob Diamond. "We will now have the best team and most productive culture across the world's major financial markets, backed by the resources of an integrated universal bank." Diamond, who negotiated the deal with Lehman chief operating officer Bart McDade, told New York employees on the trading floor, many of whom were working on their CVs: "I feel your pain. But now you have a new partner."

Diamond cancelled meetings with analysts in London on Monday and New York on Tuesday after Lehman management approached Barclays again to buy the investment banking unit.

The price includes Lehman's New York headquarters and two other properties valued at $1.5 billion.

Barclays is buying trading assets with an estimated value of $72 billion and trading liabilities estimated at $68 billion for a cash consideration of just $250 million. In effect, Barclays is buying the Lehman's core business for 0.5% of the market value it had last year at £45 billion.

It also involves taking over a balance sheet of just $75 billion rather than the $600 billion involved if it had taken over the whole of Lehman.

The businesses being bought include equity capital markets, debt capital markets, mergers and acquisitions, commodities trading and foreign exchange. Crucially, Barclays is not taking on any of Lehman's risky trades or mortgage-backed securities which drove the bank under. "It's a stripped-clean bank," said one analyst. Barclays will raise around £600 million from its existing investors, probably the wealth funds which supported its recent £4.5 billion fundraising, and said the deal would enhance earnings and boost its balance sheet.

The move could save around 9000 Lehman jobs. BarCap employs 16,000 people worldwide.

Barclays' deal will have to be approved by the New York bankruptcy court.