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Rating:Neuberger for Sale? Not Rated 3.0 Email Routing List Email & Route  Print Print
Tuesday, June 12, 2001

Neuberger for Sale?

Reported by Sean Hanna, Editor in Chief

Is Neuberger and Berman an acquisition target? The fund manager fits the profile: known as a strong value shop at a time when value is in, it is also a leader in the high net worth investor market with one of the most sought after book of clients. Throw in the reality that there are few potential targets and the quiet buzz tying Neuberger and an acquisition seems to make sense.

Last week's secondary filing by the firm threw at least some cold water on the speculators though. Wednesday, Neuberger filed to offer 5.2 million shares to the public through underwriters Goldman Sachs and Bear Stearns. The offering represents about 10 percent of its total issue. The shares are restricted stock held by employees who were principals prior to its October 1999 initial public offering, the Neuberger Berman Employee Defined Contribution Stock Incentive Plan Trust, and a limited number of charities.

The firm also said that it intends to acquire up to 1.6 million shares of its stock from a limited number of former principals in a separate, private transaction.

Employees were informed that one-third of their restricted stock would vest immediately and that they had until yesterday (Monday) to decide what to do with it. Their two choices: take the stock and pay a hefty tax bill to Uncle Sam from out of their pockets, or sell the stock as a part of the offering and use the proceeds to pay the taxes. Expect most employees to sell.

So why is this bad news for those betting on a buyout? It seems that the restricted shares had been voted by management, so any deal would be easier to survive a shareholder vote if the shares had remained restricted. Now vested, and possibly soon to rest in the hands of outsiders, the shares can vote against management in a deal. Granted, the shares effected are not enough in number to sway an outcome in all likelihood.

A second question raised by the deal is if the insiders know a deal is coming, why are they selling without a takeover premium? Good question. Neuberger and Berman shares fell about five percent after the market digested the news and another 1.3 percent Monday. 

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