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Conseco Finance gets offer
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May 26, 2000: 4:33 p.m. ET
Lehman Brothers to form group to buy troubled Conseco Finance for $750M
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NEW YORK (CNNfn) - Lehman Brothers Holdings Inc. will form an investor group to buy Conseco Inc.'s ailing consumer finance group for $750 million, a source close to the deal said Friday.
However, Conseco, an insurance group, can still seek out other buyers through mid-June, the source said, and Lehman may or may not be an investor in the group.
On Friday, the Wall Street Journal reported that if investment firm, Lehman (LEH: Research, Estimates) -- which entered a non-binding letter of intent to form the group -- took a stake it would be a minority one and any deal would include assuming $2.2 billion in debt.
The $750 million price is at the low end of the range that Conseco's management told some investors the finance unit might fetch, the Journal said. It is also far below the $6 billion the Carmel, Ind.-based Conseco paid for the finance group, Conseco Finance, in 1998.
Both Conseco and Lehman declined to comment.
Conseco Finance in troubled times
Conseco Finance has experienced problems of late. Conseco (CNC: Research, Estimates) bought Green Tree Financial Corp., now called Conseco Finance, in June 1998, and put the company up for sale last March. In late April, Conseco's chairman and chief executive, Stephen Hilbert, quit along with finance chief Rollin Dick.
 Analyst Colin Devine, of Salomon Smith Barney, said the finance group is a severe cash drain. At the end of fourth quarter, Conseco Finance took a $550 million write down which led the company to delay its 10K filing. Between August 1999 and February 2000, Conseco injected $1.7 billion into the finance group, Devine said.
A $750 million price means Conseco will only receive one-third of the company's book value, Devine said. "This implies that total write downs, including what they took in fourth quarter, against Conseco Finance will total $2.1 billion," he said.
Lehman has been sole adviser to Conseco on the sale, but Merrill Lynch & Co. has assumed the lead role recently, the Journal said.
The problems have caused Conseco's shares to plummet. At the time of the acquisition, shares were trading as high as 56. On Friday, Conseco fell 1/8 to 4-7/8, while Lehman dropped 1/4 to 72-1/4 in afternoon trading. 
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