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The widely anticipated deal will allow Lehman to better compete with bigger rivals for wealthy customers and move beyond its traditional strengths in bond trading and underwriting.

The deal values Neuberger -- which has over $63 billion in assets -- at $41.48 per share, a 2.6 percent premium above the company's closing price on Monday. However, the price marks a 20.5 percent premium above Neuberger's trading price before the merger talks became public last month.

"Strategically, this acquisition meets our objectives of enhancing business diversification and growing our higher margin businesses," Lehman Brothers Chairman and Chief Executive Richard Fuld said in a statement.

The New York investment bank said Neuberger Chief Executive Jeffrey Lane will become a vice chairman at Lehman, while the money management firm will become part of Lehman's wealth and asset management unit. "Neuberger has a big high net worth client focus and that overlaps nicely with Lehman Brothers' retail, private client focus," said Jeffrey Harte, an analyst with Sandler O'Neill & Partners.

Lehman shares were up 32 cents at $64.87 in Tuesday morning trading on the New York Stock Exchange (News - Websites). Neuberger shares were off 14 cents at $40.30.

Neuberger shareholders will receive $9.49 in cash and 0.496 shares of Lehman stock in the deal. The transaction includes a collar that will adjust the number of Lehman shares distributed if the investment bank's stock is above $66.51 during a period shortly before closing.