Lear accepts Icahn’s $2.8-billion offer
Auto parts supplier Lear Corp. said Friday that it had agreed to a buyout offer by a group affiliated with billionaire investor activist Carl Icahn for about $2.8 billion, but it left the door open for a better offer.
At least one major shareholder said he would try to get others who own stock to oppose the deal.
Under the agreement, Icahn-controlled American Real Estate Partners would pay $36 a share; a Lear spokesman said that amounted to about $2.8 billion. The deal would also include the assumption of about $2.5 billion in debt.
Icahn’s offer is less than Lear’s closing price of $40.07 on Thursday after takeover speculation drove the price higher. But the offer, made public Monday, represented a premium of 4% over the stock’s closing price the previous Friday of $34.67.
Lear’s shares fell 68 cents on Friday to $39.39.
“Lear is an excellent company with a strong management team in place,” Icahn said in a statement. “We look forward to working with Lear’s team to improve its long-term competitiveness, capitalize on growth opportunities globally and to build an even stronger and more valuable company in the future.”
After the buyout, Douglas DelGrosso, Lear’s president and chief operating officer, would become Lear’s chief executive, according to a filing with the Securities and Exchange Commission. Bob Rossiter, Lear’s current chairman and CEO, would serve as executive chairman.
Rossiter said the transaction price, at nine times Lear’s forecasted 2007 core operating earnings, excluding its interior business, “provides shareholders with significant value.”
Icahn already was Lear’s largest shareholder, owning about 16% of the company. Under terms of the agreement, Southfield, Mich.-based Lear, whose products include seats and electronic systems, may solicit alternative proposals for 45 days from the execution of the agreement.
Lear also may, at any time, respond to unsolicited proposals. If it accepts another proposal, a breakup fee would be payable to American Real Estate Partners.
Van Conway, a mergers-and-acquisitions expert and partner with Birmingham, Mich.-based Conway, MacKenzie & Dunleavy Inc., said leaving open the possibility of other offers should sit well with shareholders. “They can shop the company,” Conway said.
Richard Pzena, founder of New York-based Pzena Investment Management, which owns about 10% of Lear’s shares, said the Icahn group’s offer was too low and that his firm was trying to get other shareholders to oppose the deal.
Lear said the deal was expected to close by the end of the second quarter. The agreement is subject to the approval of a majority of Lear shareholders, regulatory filings and other customary approvals.
Lear had sales of $17.8 billion in 2006 and reported a wider fourth-quarter loss after taking charges to sell its automotive interiors unit.
The company has seen profit and sales shrink in recent periods after North American automakers sharply cut production, but its latest results beat Wall Street estimates.
Icahn’s interest in the troubled auto parts sector goes beyond Lear. He is a major bondholder in Federal-Mogul Corp., another Southfield, Mich.-based parts maker, and last year acquired about $101 million in debt in Toledo, Ohio-based Dana Corp.
