Nomura Confirms Plan To Acquire Lehman's European Operations

TOKYO -- Nomura Holdings Inc. (NMR) said it has bought the European and Middle Eastern equities and investment banking operations of Lehman Brothers Holdings Inc. (LEHMQ), a day after snagging the Wall Street firm's entire Asian franchise for $225 million.




By Alison Tudor
Of THE WALL STREET JOURNAL


TOKYO -- Nomura Holdings Inc. (NMR) said it has bought the European and Middle Eastern equities and investment banking operations of Lehman Brothers Holdings Inc. (LEHMQ), a day after snagging the Wall Street firm's entire Asian franchise for $225 million.

Lehman filed for Chapter 11 bankruptcy protection last week.

The onslaught by Japan's biggest broker by market cap shows its determination to establish itself as a global financial powerhouse. Armed with cash that it recently raised, Nomura is keen to grab market share at a time when the U.S. financial crisis is creating new opportunities.

Lehman Brothers consistently has commanded 4% of investment banking revenue globally, ranking ninth in its peer group, while Nomura had a 0.7% market share and was ranked 25th so far this year.

Nomura entered exclusive negotiations with Lehman's London insolvency administrator PricewaterhouseCoopers LLP after Britain's Barclays PLC (BCS) dropped out.

Nomura has based its international operations in London. Its four main business lines in Europe are markets, investment banking, merchant banking and asset management.

Dan Schwarzmann, joint administrator and partner at PricewaterhouseCoopers, said in a statement: "We have now focused on one party as they are interested in acquiring a wider team, which should result in a better deal for staff and creditors of these businesses."

Across the Asia-Pacific region, Lehman Brothers employed nearly 3,000 people, allowing Nomura to almost double its presence in the region outside of Japan when the two businesses are integrated. Since employees are key resources in any acquisition of a financial company, Nomura will have to act quickly to retain staff and manage any differences between the firms' cultures.

Analysts in Tokyo say they are also concerned that Nomura will have to rebuild Lehman's former trading positions and client relationships without the flagship U.S. operations, which were bought by Barclays. It may take time for the acquired businesses to once again turn a profit, they cautioned.

Nomura's aggressive move comes after a rough year of pruning its exposure to U.S. real estate mortgage-backed securities and financial insurance firms called monolines, it is back on the offensive. Still, it has plenty of cash, since it has raised 600 billion yen since April.

The collapse of Lehman Brothers gives the Japanese broker the chance to put some of this capital to work, and acquire assets shorn of links to toxic loans which have threatened to topple an increasing number of U.S. financial institutions in the last week. "It's an opportunity of a lifetime," said one senior executive at Nomura..

---By Alison Tudor, Wall Street Journal Asia