Lehman to spin off private-equity unit

Lehman Brothers Holdings Corp., which has filed for Chapter 11 bankruptcy protection, has reached an agreement in principal to spin off its private-equity arm into an independent firm, retaining a substantial interest in the business. Lehman Brothers Merchant Banking has about $4.5 billion in assets under management from two funds that will generate fees for the owners based on the performance of their private-equity investments, according to published reports citing a person familiar with the situation. The deal retains the management team that will manage Lehman’s most recent fund, a $3.3 billion pool of capital raised in 2007, published reports said. South African billionaire Johann Rupert has also agreed to assume $250 million in unfunded commitments to the fund from various institutional investors who want to reduce their exposure, according to published reports. Also, the transaction allows Lehman's estate to keep control of the older fund, which has $1.2 billion in assets and has returned more than three times the invested capital to investors. New York-based Lehman Brothers filed for bankruptcy protection in September after being ravaged by billions in mortgage-related losses. A Lehman Brothers spokesman didn’t immediately respond to a call seeking comment.