Our results during 2008 demonstrate that Lazard’s simple business model provides opportunities for us, our clients and our shareholders. Even in a volatile environment, Lazard’s distinct intellectual capital approach performed well relative to the industry.
Operating revenue was $1.68 billion for the full year of 2008. Adjusted net income on a fully exchanged basis was $205.9 million or $1.72 per share, diluted, for the full year of 2008.1 Lazard continued to maintain liquidity and control costs.
financial advisory
Lazard has maintained and strengthened its role as the independent advisor for clients on complex transactions and situations that transcend economic cycles. We completed significant transactions during 2008, including: InBev’s $52 billion acquisition of Anheuser-Busch, the largest all-cash deal in history; Gaz de France’s €44.6 billion merger with Suez; for the Ministry of Finance of the Netherlands in the State of the Netherlands’ €16.8 billion acquisition of the Dutch-based banking and insurance businesses of Fortis and Fortis’ share in ABN Amro Holding; Trane’s $10.1 billion sale to Ingersoll-Rand; Resolution plc’s £5.0 billion sale to Pearl Group; Mitsubishi UFJ Financial Group’s $9 billion investment in Morgan Stanley; The Royal Bank of Scotland Group’s $7 billion sale of Angel Trains to a consortium of global infrastructure investment funds led by Babcock & Brown; International Paper’s $6 billion acquisition of Weyerhaeuser’s packaging business; APP Pharmaceuticals’ $5.6 billion sale to Fresenius; and Bear Stearns’ $1.4 billion sale to JPMorgan Chase.
Among the pending, announced M&A transactions
on which Lazard advised in the fourth quarter,
continued to advise, or completed since December
31, 2008, are for the Haas Family Trusts in Rohm
and Haas’ $18.8 billion sale to Dow Chemical; the
Nuclear Liabilities Fund in British Energy’s £12.5
billion recommended sale to EDF; Exelon on its
$13.7 billion exchange offer for NRG Energy;
and the shareholders of Essent on the €9.3 billion
offer by RWE.
In addition to our M&A activities, we are helping
our clients with our global restructuring team’s deep
talent and advisory experience in Chapter 11 and
out-of-court restructurings, sales of distressed assets,
debt advisory, capital structure advisory and capital
raising around the world. Given our leadership
position in this business, we have seen a dramatic
increase in the level of our restructuring and capital
structure advisory activity in the fourth quarter of
2008, which we expect to continue in 2009. Lazard
is currently engaged on more than 70 restructuring
assignments in over 20 industry sectors worldwide,
many of which are not publicly disclosed assignments.
In North America, we have been advising on 13
of the top 25 bankruptcies that have been filed
since January 2008. These include bankruptcies
of Lehman Brothers, Tribune Company, Nortel
Networks, Smurfit-Stone, Tropicana Casino &
Resort, Pilgrim’s Pride, WCI Communities, Trump
Entertainment Resorts, TOUSA, LandSource,
Vertis, Hawaiian Telcom and Tarragon Corporation.
In addition, we continue to advise Journal Register,
Midway Games and Pacific Energy Resources
in connection with their chapter 11 bankruptcy
proceedings. Other current assignments include
advising Charter Communications, Capmark
Financial, RH Donnelley and Station Casinos
with regard to their restructuring initiatives, and
we are advising the secured lenders to Masonite,
Spectrum Brands and BearingPoint Inc. We also
are advising the UAW in its dealings with Ford,
GM and Chrysler and a number of automotive
suppliers in the US and Europe.
We also are seeing a heightened level of restructuring
and debt advisory activity in Europe and around
the globe, including advising on the restructurings
of Colonial, Countrywide, Metrovacesa, Premiere,
and British Vita Group, as well as advising the
Fellow Shareholders,
Our results during 2008 demonstrate that Lazard’s simple business model provides
opportunities for us, our clients and our shareholders. Even in a volatile environment,
Lazard’s distinct intellectual capital approach performed well relative to the industry.
1 These results exclude an after-tax, LAM equity charge of $192.1 million and provisions for losses from counterparty defaults
of $9.5 million relating primarily to the bankruptcy filing of one of our prime brokers, all occurring in the third quarter of 2008.
creditors of Belvedere and Ferretti. We also
are advising Ineos on its covenant negotiations,
Olympic Airways on the sale of certain assets
and Ecuador on its debt restructuring.
asset management
Lazard’s Asset Management business is diversified
by geography and by product. The impact of market
depreciation reduced Assets Under Management
but our Asset Management business had positive
net inflows in 2008 and offered many superior
investment strategies for our clients.
strategic update
Our strategy is to take the long view and focus on
our client relationships, as we have for over 160
years. We will reinforce our areas of strength, invest
in areas of growth, develop new products, contain
costs and maintain liquidity, in order to take advantage
of future opportunities. For the long term, our
growth drivers will be the resurgence of M&A, the
continued need for restructuring and capital raising,
and our Asset Management business.
Talent and Retention. During the past year, new
hires included a European-based Vice Chairman of
Lazard International specializing in healthcare and
global transactions; UK-based managing directors
in the financial institutions group; a European
managing director specializing in mining and metals;
and European debt advisory professionals in
France, Germany and the UK. Key hires in the US
included senior advisory professionals in restructuring,
the aerospace & defense sector and the Lazard
Middle Market business, as well as the return of our
global head of power, utilities and infrastructure.
We intend to continue to hire key professionals on
a selected basis and to redeploy employees into areas
where we see potential for growth: restructuring,
financial institutions advisory and other sectors, and
selected areas in Asset Management.
Products. We are continuing to broaden the products
we offer clients in such areas as debt advisory
and capital structure advisory.
Geographic Expansion. We continued to broaden
and solidify our geographic footprint through
acquisitions and strategic alliances in Financial
Advisory. In January 2008, we formed MBA Lazard
as a result of acquiring a 50% interest in Merchant
Bankers Asociados, with offices across Central and
South America. In February 2009, we entered into
a strategic alliance with a financial advisory firm in
Mexico. As a result, we now have full coverage of
the Latin American region. In Asset Management,
we have been expanding our operations in Asia.
Finally, our financial position remains strong. With
approximately $1 billion in cash and marketable
equity securities at the end of 2008, we are continuing
to invest in growth areas of our businesses. To
further optimize our mix of personnel, we also have
been reducing staffing in other areas and our back
office, to create greater efficiency, productivity and
shareholder value.
As we look ahead to 2009, global economic challenges
may persist for some time. Based on our continuing
performance and ability to find opportunity in
turbulent markets, I remain confident in the longterm
strength of our distinct business model and am
committed to investing in and growing the global
Lazard franchise for the benefit of our shareholders,
clients and employees.
Bruce Wasserstein
Chairman and Chief Executive Officer