Lear Board Backs Icahn-led Buyout

From AFX News Limited

DETROIT — Lear Corp.’s board is recommending that company shareholders vote in favor of a buyout offer by a group affiliated with billionaire investor Carl Icahn for about $2.8 billion, but some stockholder opposition to the deal remains.

The automotive supplier said in a preliminary proxy statement filed Tuesday with the Securities and Exchange Commission that the board determined the offer is fair and in the best interests of the company and its shareholders. The board considered the recommendation of a special committee of independent directors.

Under the agreement announced last month, Icahn-controlled American Real Estate Partners LP is paying $36 a share, and Lear said at the time that amounts to about $2.8 billion. The offer also included the assumption of about $2.5 billion in debt.

Lear said in the SEC filing that J.P. Morgan Securities Inc. reviewed the offer and decided that the agreement was "fair from a financial point of view to such holders of shares of our common stock."

The filing also details the meetings leading up to the announcement of the offer. It said Bob Rossiter, Lear’s chairman and chief executive, met Jan. 16 with Icahn and others in New York, where the buyout idea was raised.

"Icahn suggested that the company might be able to take a longer-term focus, more aggressively pursue restructuring initiatives and be better positioned to withstand volatile industry conditions as a private company with a strong financial sponsor," the filing said.

Lear’s shares rose 14 cents Tuesday to close at $36.80 on the New York Stock Exchange.

Lear said Feb. 9 it had agreed to the $36-per-share buyout, which was less than the stock’s Feb. 8 closing price of $40.07 after takeover speculation drove Lear’s price higher. But the offer, made public Feb. 5, represented a premium of 4 percent over the stock’s previous closing price of $34.67 the week before.

Icahn owns about 16 percent of the company. The deal faces opposition from some shareholders, some of whom have filed lawsuits trying to block the agreement. Lear says the suits are without merit.

But Richard Pzena, founder of New York-based Pzena Investment Management LLC, which owns about 10 percent of Lear’s shares, said his firm has been in touch with major shareholders to rally opposition to the deal. Long-term, Pzena has estimated that Lear would be worth about $60 a share.

"Most believe that the price is not fair," Pzena said.

He noted that Lear in Tuesday’s filing lowered its long-term outlook — including sales estimates for 2007 through 2010 — but he said the revision could be aimed at encouraging shareholders that Icahn’s offer is worth taking.

A date hasn’t been set for the company’s annual meeting, where a vote on the buyout offer would take place.

Under the terms of the agreement, Lear, whose products include seats and electronic systems for all major automakers, may solicit alternative proposals and has said it intended to consider such proposals. That deadline is the end of the day Monday. Lear also may, at any time, respond to unsolicited proposals.

The filing said the special committee and the board also considered "risks and other potentially negative factors" in the deal. Those include the provision that if Lear breaks the deal under some circumstances, it would pay $85.2 million to Icahn’s group plus up to $15 million in expenses.

The deal, which Lear hopes to complete at the end of the second quarter, is subject to regulatory approvals.

Southfield, MI-based Lear had sales of $17.8 billion in 2006 and reported a wider fourth-quarter loss after taking charges to sell its 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.