Ladenburg Thalmann analyst Dick Bove appeared on CNBC to explain his thesis that Lehman Brothers (LEH) is likely to attract hostile takeover bids. Bove also threw mud at Lehman CEO Dick Fuld, accusing him of dithering as Lehman's value has evaporated.
Bove values Neuberger Berman between $10 and $13 billion per share and thinks Lehman could sell for $20 per share in a hypothetical takeover.
Transcript courtesy CNBC:
CNBC’s Mark Haines: SHARES OF LEHMAN SURGING ON REPORTS THAT KOREA DEVELOPMENT BANK MIGHT BE INTERESTED IN ACQUIRING THEM. HERE TO TELL US WHY LEHMAN IS A HOT TAKEOVER TARGET RIGHT NOW, DICK BOVE. DICK, GOOD MORNING. WHAT MAKES LEHMAN SO ATTRACTIVE?
Dick Bove: I THINK IF YOU TAKE THE VALUE OF NEWBERGER BERMAN, BASED ON THE 20 TIME MULTIPLE, WHICH IS WHAT MONEY MARKET FIRMS SELL FOR, IT'S PROBABLY WORTH ABOUT $10 TO $13 BILLION, WHICH IS MORE THAN WHAT LEHMAN IS WORTH. THEREFORE, WHOEVER WANTS TO BUY LEHMAN CAN BUY NEW BERGER BERMAN AND WALK AWAY WITH MONEY IN THEIR POCKET AND STILL OWN ALL OF LEHMAN FOR NOTHING. IN OTHER WORDS, THE VALUATION OF LEHMAN HAS DROPPED TO SUCH A RIDICULOUSLY LOW LEVEL THAT HOSTILE TAKEOVERS ARE NOW VERY MUCH IN PLAY.
Haines: WELL, FOR SUCH A GLARING, SCREAMING BARGAIN, THAT WOULD -- YOU'D KIND OF THINK THERE WOULD BE MORE THAN ONE BIDDER.
Bove: I THINK THERE WILL BE. I THINK DICK FULD HAS PLAYED HIS HAND TOO LONG. HE'S WAITED TOO LONG TO COME UP WITH A RESOLUTION TO LEHMAN'S PROBLEMS. UNLIKE JOHN THAIN, WHO JUMPS IN AND SLASHES AND BURNS AND KNOCKS DOWN EVERY PROBLEM THE MINUTE HE SEES IT. DICK FULD HAS NOT BEEN DOING THAT. DICK FULD HAS BEEN PROVIDING BAD INFORMATION TO THE STREET, AND DICK FULD HAS OBVIOUSLY TAKEN MUCH TOO LONG TO TRY AND COME UP WITH A SOLUTION. THE NET RESULT IS, HE'S INFURIATED PEOPLE INSIDE THE LEHMAN, WHO ARE SEEING THEIR WEALTH EVAPORATE. HE'S INFURIATED PEOPLE WHO OWN THE STOCK. AND I THINK HE'S LOST CONTROL OF THE GAME. SO, I THINK IF HE DOESN'T DO SOMETHING THIS WEEKEND, AS OF NEXT WEEK, THE GAME IS ON, BECAUSE WHAT THE KOREAN DEVELOPMENT BANK IS CLEARLY SAYING IS WE KNOW WE CAN'T TAKE OVER LEHMAN, BECAUSE THE REGULATORS IN THE UNITED STATES WON'T LET US. BUT WE'VE GOT THE MONEY, AND IF YOU, MR. AMERICA , WHOEVER, WANT TO TAKE A BID, COME AND TALK TO US, WE'LL FUND IT.
CNBC’s Erin Burnett: DICK, HERE'S MY QUESTION -- BY THE WAY, WE CALLED LEHMAN BROTHERS AND THEY TOLD CNBC THEY DECLINED TO COMMENT. BUT TWO QUICK THINGS.LEHMAN RIGHT NOW IS UP TO $15.28. WHAT IS THE PRICE THIS COMPANY WILL GO AT? AND WHEN YOU SAY DICK FULD HAS UNTIL NEXT WEEK, TO DO WHAT? WILL IN THERE BE FIVE BIDDERS ALL OF A SUDDEN, OR WILL THE KOREAN DEVELOPMENT BANK WHICH WOULD SHOCK US AND GO HOSTILE?
Bove: I THINK THE PRICE WILL BE $20 A SHARE. WE THOUGHT THAT YESTERDAY WHEN WE PUT OUT THE NOTE, ARGUING THAT A HOSTILE TAKEOVER MIGHT BE POSSIBLE, THAT IT WOULD BE AT A 50% PREMIUM TO THE PRICE AT THAT POINT, WHICH WOULD BE $20 A SHARE, AND I'M STICKING TO THAT NUMBER. SECONDLY, I THINK THAT WHAT HE'S GOT TO DO IS EITHER SELL HIS COMMERCIAL REAL ESTATE, HE'S GOT TO BRING IN CAPITAL FROM SOME SOURCE, BUT HE'S GOT TO SHOW THE MARKET THAT HE HAS A RESOLUTION, AND THAT THIS COMPANY NOW CAN PROCEED FORWARD IN A POSITIVE VEIN. IF HE DOESN'T DO THAT, THEN I AM CONVINCED THAT YOU'VE GOT SO MANY PRIVATE EQUITY -- YOU KNOW, YOU'VE GOT PRIVATE EQUITY FIRMS THAT PUT $7 BILLION INTO WASHINGTON MUTUAL AND ANOTHER ONE THAT PUT $7 BILLION INTO NATIONAL CITY. NEITHER COMPANY CAN TOUCH LEHMAN IN ANY WAY, SHAPE, OR FORM IN TERMS OF QUALITY. THIS THING WOULD ONLY COST $7.8 BILLION YESTERDAY.SO, THE NET EFFECT IS, WE'RE NOT TALKING ABOUT A LOT OF MONEY RELATIVE TO THE NUMBER OF PRIVATE EQUITY FIRMS, LAZARD, GREEN HILL, ANY NUMBER OF FIRMS.
Haines: THANK YOU VERY MUCH, DICK .WE'VE GOT TO GO.
See Also: Lehman (LEH): Now Taking Bids On Neuberger
Desperate Lehman (LEH) May Dump Entire Investment Management Division
