Jobs hope as Barclays buys chunk of Lehman

Lehman put itself into bankruptcy protection in the US and administration in the UK yesterday after the failure of weekend talks with Bank of America and Barclays for a full-scale takeover. But Lehman's management approached Barclays again late yesterday, asking if it wanted to buy its broker-dealer arm, which was excluded from the bankruptcy protection.

This is the share, currency and bond-dealing part of the business and could also include its corporate finance advisory arm. These businesses employ almost 10,000 out of Lehman's worldwide staff of 25,000. It is not clear whether Barclays' deal included the London business in Canary Wharf, which employed 4000 people in investment banking.

Bob Diamond, Barclays president and head of investment banking arm Barclays Capital, who was paid £21 million last year, headed today's deal
negotiations.

The weekend takeover talks collapsed because the US government would give Barclays no guarantee it would be protected from Lehman's exposure to subprime and other toxic loans.

Today's talks were completely different because the business is now split into a "bad bank", which is in administration, and a "good bank", which has very little exposure to bad loans. It is understood all Barclays is now looking to take over is a series of licences to trade, infrastructure including trading systems and the people who are employed in the broker-dealer business.

Details of the takeover of the rump of Lehman's investment banking business were scant but analysts said they expected Barclays to raise at least a small amount of extra capital.

Barclays told the Stock Exchange early this morning: "Barclays confirms that it is discussing with Lehman Brothers the possible acquisition of certain Lehman assets on terms that would be attractive to Barclays shareholders."

Barclays shares fell 13¾p to 302¼p, a considerably smaller drop than those of rivals HBOS and RBS.

Diamond remained in New York yesterday, having led the talks over the weekend and cancelled a presentation to banking analysts in London yesterday morning. He has made no secret of the fact that he is very keen to expand Barclays' investment-banking presence in his home country.
Sources close to the talks said they would have to be concluded rapidly.

"This is a business which needs to do a deal very quickly," they said. "Key people are already walking away. But at least Barclays has already done most of the due diligence." What is very clear is that the talks exclude any of Lehmans' property, mortgage-backed securities and other toxic loan areas of business. By putting the vast majority of the bank into Chapter 11 in the US and administration in this country, those areas are now effectively ring-fenced.

The broker-dealer businesses in New York and London were specifically excluded from the Chapter 11 and administration applications.