Lehman Brothers Eyes Conseco Finance Unit Acquisition

Strategic Insights -

Lehman Brothers, a leading investment bank, is reportedly exploring the possibility of forming an investor group to acquire the beleaguered Conseco Finance unit, formerly known as Green Tree Financial. The proposed deal, worth $750 million, would see Lehman pay $2.2 billion for 72 percent of the business, with Conseco retaining a 28 percent stake. This move would allow Conseco to unload $2.2 billion in loans and share in future profits. Separately, Wells Fargo has expressed interest in the business, but concerns about the quality of the loan book and distribution have raised doubts about the attractiveness of the deal.

Key Takeaways:

  • Lehman Brothers is exploring the acquisition of Conseco Finance unit with a proposed deal worth $750 million.
  • The deal would see Lehman pay $2.2 billion for 72 percent of the business, with Conseco retaining a 28 percent stake.
  • Conseco would unload $2.2 billion in loans and share in future profits from the business.
  • Wells Fargo has expressed interest in the business, but concerns about the quality of the loan book and distribution have raised doubts.
  • Conseco Finance is one of the largest employers in downtown St. Paul, with 1,400 workers and plans to relocate another 700 to downtown.
  • The collapse of Conseco's value has been tied directly to about $1.5 billion in business writeoffs attributed to Green Tree's aggressive gain-on-sale accounting practices.
  • Minneapolis businessman Irwin Jacobs believes Conseco will rebound once it sells the finance unit, which he believes has value if put in the hands of a bigger, stronger owner.

Statistics:

  • $750 million: proposed deal worth for Lehman Brothers to acquire Conseco Finance unit.
  • 72 percent: percentage of Conseco Finance unit to be owned by Lehman Brothers.
  • $2.2 billion: value of loans that Conseco would unload under the proposed deal.
  • 28 percent: percentage of Conseco Finance unit to be retained by Conseco.
  • 1,400: number of workers employed by Conseco Finance in downtown St. Paul.
  • $4.88: stock price of Conseco per share on Friday.
  • 90 percent: decline in Conseco's stock price from the time of the Green Tree acquisition.
  • $1.5 billion: business writeoffs attributed to Green Tree's aggressive gain-on-sale accounting practices.
  • 3.2 percent: percentage of Conseco stock owned by Minneapolis businessman Irwin Jacobs.
  • $5 to $7: per-share price paid by Jacobs for his Conseco stock holdings.

Sources:

  • Dow Jones News Service.