Lehman ‘reaches a deal’ on new sell-off

Failed investment bank Lehman Brothers is said to have reached an agreement in principle to sell its merchant banking business, made up of two private equity funds, to management of the funds.

Managers from the merchant banking business leading the proposed deal are believed to be Charles Ayres and Daniel James.Insiders say the business to be spun out would also take in new investment from South African billionaire Johann Rupert.

Lehman's bankruptcy estate is understood to be planning to retain a substantial interest in the funds.

The deal is the result of a formal auction run by Lazard that attracted interest from several private-equity firms including Blackstone and Lexington Partners.

There was no indication on price but the funds have about $4.5 billion (£2.96 billion) in assets from a string of investors.

Lehman has been selling assets since hitting the rocks in September.