Korea Development Bank eyeing Lehman Bros

23 August 2008

Richard Fuld, Lehman's embattled chief executive, does not know whether the news of Lehman Bros share price jumping to 13.1 per cent, or $1.80, to $15.52, in midday trading yesterday was good news or bad.

The 5-per cent rise in the share prices, which rose 16 per cent on intraday trades was due to the news that state-run Korea Development Bank was open to investing in the credit-hit investment brokerage firm as it seeks much-needed capital and market confidence.

For the South Korean bank, Lehman's prevailing lowered valuations would enable it to buy it and extend its their reach overseas.

In fact, Lehman's stock had taken a beating on Thursday when talks between Lehman and potential foreign investors from Korea, Singapore and China broke down from a possible deal thinking it to be too risky.

Lehman could not find itself an overseas investor to bail it out even as Merrill Lynch attracted two multibillion-dollar investments Singapore's Temasek in the past year, Morgan Stanley received $5 billion from China Investment Corp and Abu Dhabi poured in over $7.5 billion in Citi.

The Korean bank is said to be looking at various options, one of which could be a possible acquisition of Lehman, which is only looking to hike-off its commercial mortgage-backed business and roughly $40 billion in commercial real estate investments.  It may also seek bidders for its investment management division, including the richly valued Neuberger Berman fund complex.