Ken Lewis Mulls Another Deal as Lehman Reaches Brink

As soon as Lehman Brothers (LEH) shares hit $4 today and reports came out that the company is up for sale to try and survive, only one name came to my mind as a potential buyer; Bank of America (BAC) CEO Ken Lewis. The guy loves doing deals. Who else would have bought Countrywide?

Since Peridot is long BAC, one of the two things I am worried about (the first is obviously Lehman’s ugly balance sheet) is the price that Lewis might agree to pay for Lehman should a deal be reached. Lewis isn’t shy about overpaying for firms he really wants, and he loves to grow by acquisition. FleetBoston, MBNA, U.S. Trust… not a bargain among them (Countrywide is still a question mark).

Now that Lehman CEO Dick Fuld has completely blown it (even after seing exactly how things played out with Bear Stearns!), BAC is likely the most probable suitor at this point, and thus I am not surprised their name is already being mentioned in press reports this evening.

Don’t overpay, Ken!

Full Disclosure: Long shares of BAC at the time of writing

Update Friday 9/12 9:05AM ET
Rumors today are that the U.S. government will not provide public funding to aid in a takeover of Lehman, as was the case with Bear Stearns. In that case, Bank of America should balk at buying the whole firm. I would love if they just bought a stake in Neuberger Berman, which was the kind of deal LEH was seeking several weeks ago. NB is the crown jewel of Lehman and would be a great asset for BAC to buy in order for LEH to get much needed capital.

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3 Thoughts on “Ken Lewis Mulls Another Deal as Lehman Reaches Brink

  1. Having hit a 5 year low merely two months ago BAC is hardly in prime shape for making deals.

    To date I do not know what actually has happened with the BS deal from a few months ago when they first were about to buy it at a screaming deal price and then – if I remember correctly – the government got involved and nearly doubled it.

    Also, when reading your post I didn’t understand if all of the past quoted accuisitions were successful or failures.

  2. Chad Brand on September 12, 2008 at 5:34 AM said:

    Since none of the banks are in prime shape to do deals, it comes down to who is in the best shape relative to the others. In that sense, BAC is near the top after JPM took on Bear Stearns.

    The past BAC deals were done at high prices, but that doesn’t mean they were unsuccessful (it depends how you judge success). They got prime assets that they wanted to fill in their product offering and geographic reach, so I’m sure CEO Lewis would say it was worth the price they paid. Regardless, they did not get a bargain, whereas in these times bargains can be had since sellers are far more motivated than normal.

    I would love to see Lewis balk on buying all of Lehman and just buy Neuberger Berman. The asset management business is a good one and NB is the crown jewel of Lehman.

  3. shepherd on September 14, 2008 at 5:01 PM said:


    If the wires are correct, it looks like Lewis paid a premium to purchase Merrill Lynch. I’m curious why you hold BAC, given that he seems to have an almost emotional need to acquire things, which gets in the way of negotiating the best price for his shareholders. My guess (admittedly from afar) is that he could have done better…

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