July 17, 2007 -- Shareholders of Lear Corp. rejected Carl Icahn's $37.25 (U.S.)-a-share buyout offer in a victory for some top stockholders who argued the deal undervalued the U.S. supplier of automotive parts. Mr. Icahn's American Real Estate Partners LP reluctantly raised its offer last week from $36 a share and said the acquisition agreement would terminate if shareholders didn't approve the deal by yesterday. Mr. Icahn, the top Lear shareholder, with a 15.6-per-cent stake, had previously said he wouldn't raise the offer for the Michigan company. But Lear's board, which recommended voting in favour of the buyout, persuaded him to raise the deal amid worries that not enough shareholders supported it.
Failure to get a majority of holders to approve the $2.9-billion offer – a result that came during Lear's annual shareholders meeting – is another sign of new challenges to the private equity buyout boom. The struggling auto parts sector, in particular, has attracted private equity and hedge fund interest with low valuations and expectations that restructuring can turn the companies around. But shareholders at Lear appear to be betting that their long-term prospects are better under current management, as the auto parts supplier has already restructured significantly and improved its financial footing.
Lear, which makes automotive seats and electronic and electrical systems, twice increased its estimate for 2007 core operating earnings and has turned a money-losing interior-plastics division over to a joint venture controlled by Wilbur Ross. “We respect the stockholder majority and intend to operate our business going forward with the same high level of intensity and commitment to customer satisfaction and stockholder value we have always had,” said Robert Rossiter, Lear's chief executive officer. “At the time we entered into the merger agreement with AREP, we had a clear strategy and business plan for the future. We will continue to execute that plan.”
Analysts have said Lear's share price could come under pressure in the short term but should recover as the company is on better financial footing after restructuring and jettisoning its interior-systems business. Failure to approve the offer entitles American Real Estate Partners to a payment of $12.5-million in cash and 335,570 shares of Lear. That fee was negotiated as part of Mr. Icahn's sweetened per-share offer.
Source: Wall Street Journal
Source: Factiva
