Dow Jones

WASHINGTON — A report that Lehman Brothers Holdings Inc. is interested in acquiring Bear Stearns Cos. drew a mixture of surprise and skepticism from Wall Street market observers.

Spokesmen for Lehman and Bear Stearns refused to discuss the report, in Thursday’s Financial Times. The newspaper said Lehman was in the early stages of considering making a bid for Bear Stearns.

Speaking on condition of anonymity, several people at Lehman Brothers discounted the notion of a combination with Bear Stearns. ING Group NV, Bank of America Corp., and Bank of New York Co. had all been cited by market observers as possible suitors for Bear Stearns, but Lehman had never been included as a serious contender.

Traders and an analyst expressed mostly doubt about the likelihood of it occurring, particularly at the price Bear Stearns executives have named.

“I can’t see how it makes sense,” said Lauren Smith, an analyst with Keefe, Bruyette & Woods Inc. “Bear’s clearing business is the one business that Lehman doesn’t have in scale. Away from that, everything else is overlap.

“I can’t imagine [Lehman chief executive] Dick Fuld paying a premium for just a clearing business. And then think about what he’d be gutting.”

Bear Stearns’ interest in a merger has been a subject of discussion since the summer, after Salomon Smith Barney analyst Guy Moszkowski penned a report about a conversation he had had with chief executive Jimmy Cayne. In the report, Mr. Moszkowski said Mr. Cayne had indicated that Bear Stearns could be sold for four times book value, or $120 a share.

Adam Lewis, a senior vice president on Keefe, Bruyette & Woods’ trading desk, said that he had not heard rumors about Lehman’s interest in Bear Stearns, but that he doubted Lehman would be willing to pay $120 a share.

Tom Reggio, the head of A.G. Edwards Inc.’s trading desk, dismissed the idea as an unsubstantiated rumor and said valuations in the brokerage industry in general remain a bit too high to encourage such a merger.

“In my opinion, if anything does happen it wouldn’t be until next year. Stock prices are too inflated,” he said.

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