NEW YORK (CNN/Money) -
In a highly anticipated deal that will increase its offerings to wealthy individuals, Wall Street brokerage firm Lehman Brothers confirmed Tuesday it will buy money manager Neuberger Berman for $2.6 billion in cash and stock.
"Neuberger has a big, high-net-worth client focus, and that overlaps nicely with Lehman Brothers's retail, private-client focus," said Jeffrey Harte, an analyst with Sandler O'Neill & Partners.
Neuberger shareholders are to receive $9.49 in cash and 0.496 share of Lehman stock for each of their shares, equal to $41.48 per Neuberger share based on Monday's closing price. That represents a 3 percent premium over Monday's closing price of $40.44 for Neuberger.
Shares of Neuberger (NEU: down $0.42 to $40.02, Research, Estimates) and Lehman (LEH: down $0.77 to $63.73, Research, Estimates) fell about 1 percent in midday trading on the New York Stock Exchange.
The New York investment bank said Neuberger CEO Jeffrey Lane, who has worked with Lehman Brothers Chairman and Chief Executive Richard Fuld in the past, will become a vice chairman at Lehman. The money management firm will keep its name and become part of Lehman's client services segment's wealth and asset management division.
Executives said they expect few layoffs from the merger since Neuberger's business and about 1,250 employees will essentially be added on to Lehman.
Lehman said it expects the merger to slightly lower per-share earnings in 2004.
The deal is not a surprise.
Lehman had publicly disclosed discussions to buy Neuberger on July 1 and said July 14 that talks were progressing. Neuberger stock had gained some ground since the July 1 statement, while Lehman shares have slipped.
If the same ratio and cash contribution had been in effect, the deal would have been worth about a 6 percent premium on June 30, the day before the first announcement.
Neuberger shareholders could receive less stock if Lehman shares climb above $66.51 prior to the closing of the deal, which is expected to take place in Lehman's fiscal fourth quarter, which ends in November.
The deal has been approved by each company's board and needs the approval of Neuberger shareholders as well as regulators.
The deal includes a $95 million break-up fee should either of the two sides fail to complete the merger.
--from staff and wire reports