AP News, July 9th, 2007
Lear Corp. shareholders have a few more days and a slightly sweetened deal to ponder from a group led by billionaire investor Carl Icahn.
The Icahn-controlled American Real Estate Partners LP agreed to increase its offer for Lear by about 3.5 percent to about $2.9 billion, and the automotive supplier said Monday it will delay the shareholder vote on the offer.
American Real Estate Partners increased its price for shares of Lear common stock from $36 a share to $37.25 a share.
The original offer represented a premium of about 4 percent over the stock's value at the time it was made in February by Icahn, already Lear's largest shareholder.
"The Lear board concluded unanimously that the original merger agreement with (American Real Estate Partners) was fair and in the best interests of Lear's stockholders. The increased price makes the transaction even more attractive," Larry McCurdy, Lear's lead independent director, said in a statement. "We believe the revised price represents a meaningful increase in value for Lear stockholders, and we strongly encourage a vote in favor of the revised merger proposal."
A message seeking comment was left Monday by The Associated Press for American Real Estate Partners.
Lear, which already had moved its annual shareholder meeting from June 27 to Thursday amid shareholder criticism of the deal, said it will adjourn Thursday's meeting in Wilmington, Del., without a vote and move it to July 16.
Under the amended agreement, if holders of a majority of Lear's outstanding shares don't approve the proposal, American Real Estate Partners will be entitled to $12.5 million in cash and 335,570 shares of Lear common stock. The company also has agreed to increase the Icahn group's share ownership limitation from 24 percent to 27 percent of Lear's outstanding common stock.
Icahn now owns about 16 percent of the company.
Shareholder Richard Pzena, who owns about 10 percent of Lear shares, is among some big shareholders who have opposed the deal. He has said since it was announced that Lear would be eventually worth about $60 a share.
Opposition increased last month when three shareholder advisory services and the California State Teachers' Retirement System, which owns about 2 percent of Lear, came out against the bid. Besides calling it a "stunningly inadequate price," the retirement system said it did not believe the shopping process was fair or thorough.
"Getting an extra dollar is better than not getting it," Pzena said Monday. "It's certainly not even close to enough to make us or some of the other long-term shareholders to change their vote."
Pzena also criticized the $25 million breakup fee, saying such a fee typically is applied only if management decides to sell to another bidder, not because shareholders reject the deal.
"That's really unusual and offensive to all of the long-term shareholders I've talked with," he said. "On the one hand, they say we want you to vote. But then they come back and say, 'If you vote against it we're going to charge you $25 million.'"
Lear spokesman Mel Stephens said Lear was able to negotiate a price that represents about $100 million in added value to its shareholders in return for Icahn's consideration for the $25 million breakup fee.
"We thought that was a fair and reasonable trade-off for the opportunity it provided," Stephens said.
Despite the criticism, analyst Kevin Tynan thinks shareholders will approve the deal _ and would have at $36 a share. He believes the silent majority sees this as a best-case scenario for Lear as it and other suppliers struggle alongside the slumping Detroit Three automakers.
"I think it maybe adds a little grease to the wheels in getting the deal done, but very little," said Tynan of Argus Research, a New York-based equity research company.
Southfield-based Lear's products include seats and electronic systems for all major automakers. It has 90,000 employees at 236 facilities in 33 countries.
Lear shares rose 99 cents, or 2.8 percent, to $36.85 Monday.
___
On the Net:
Lear Corp.: http://www.lear.com
