The spin-off, which Lehman said should be completed by the end of June, will involve American Express buying dollars 904m worth of Lehman common shares. These will then be turned over to Amex shareholders in the form of a special dividend. In addition, Amex will buy an additional dollars 200m of Lehman preferred shares.
Under a plan announced in January, American Express shareholders were to have ended up with a 90 per cent stake in Lehman, with the remaining share to be purchased by employees of the investment bank.
But Nippon Life Insurance, which invested dollars 508m in Lehman convertible preferred shares several years ago, has decided to exercise its rights to buy equity in the new firm, and will end up holding about 8.5 per cent.
Lehman employees will own about 5.5 per cent, spending dollars 57m from an existing stock-ownership plan. In exchange for its capital infusion - which will increase Lehman's shareholder equity to dollars 3.3bn - American Express will receive 50 per cent of any annual profits over dollars 400m for the next eight years, to a maximum of dollars 400m. But it will hold no common equity in the firm, nor have any seats on its board. Nippon Life will have two representatives among the nine directors.
Richard Fuld, Lehman's chief executive, will also become chairman, while Christopher Pettit, Lehman's president, will join the board.Reuse content