As the market awaits an announcement on Lehman’s fate, we must return to Richard X Bove, the Ladenburg Thalmann analyst who has been issuing increasingly hysterical warnings that if Richard Fuld and team did not get their act together, Lehman Brothers would find itself on the end of a hostile takeover bid.
Of course, what we may now get instead is a hostile take-under. (HT Carlomagno) Amid expectations of an announcement at 12 noon BST, Lehman spokespeople were simply offering the newswires a firm “no comment.”
In the meantime, here’s what Bove is saying in his latest missive to clients.
As part of this emergence I believe that Bank of America will win the auction for Lehman Brothers. There is a natural fit between the two companies.
Lehman needs Bank of America to lower its borrowing costs. It also needs the bank to portfolio its commercial real estate loans. These are negative reasons. Most important, Lehman can gain access to Bank of America’s 68,000 commercial customers to sell capital markets products. Further Lehman would meaningfully increase its fixed income business if it was linked to the country’s largest credit card and mortgage company.
Bank of America gets access to one of the best fixed income trading desks in the country. It immediately becomes a first rank player in the equity investment banking sector. It gains Neuberger Berman. It gains a top quality retail sales operation. It improves its standing in all types of research. It gains access to customers around the world in the capital markets arena. It can cut back some duplication in these areas. It gains five years in its pursuit to be the nation’s number one underwriter.
If the deal is done for stock it adds to Bank of America’s equity. This deal would be a major plus if the bank wins it.