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Icahn offers to buy auto parts supplier Lear

The activist investor makes a $2.4-billion bid, propelling the firm's stock up 11.5%.

February 06, 2007|From Reuters

BOSTON — Activist investor Carl Icahn has made a $2.43-billion offer for auto parts supplier Lear Corp., the two parties said Monday.

Icahn affiliate American Real Estate Partners said in a filing with the Securities and Exchange Commission that it offered to buy Southfield, Mich.-based Lear for $36 a share in cash.

Lear shares surged $3.97, or 11.5%, to $38.64.

"Many investors are anticipating a higher bid to come in," said William Lefkowitz, options strategist at brokerage firm VFinance Investments Inc.

Morningstar Inc. equity analyst John Novak said Icahn was buying at a good time, as the company "has gone through a lot of restructuring."

"We've been saying that the company is worth somewhere in the mid-$40s," Novak said, referring to per-share value, "so it looks to be a good deal for him and not such a great deal for shareholders."

Icahn's offer represents a 3.8% premium over Lear shares' closing price of $34.67 on Friday.

The total deal value is calculated based on 67.4 million shares outstanding as of the company's last quarterly filing with the SEC.

Billionaire Icahn is well known for pressuring the management of companies in which he invests to improve performance and buy back shares. He disclosed plans last week to seek a seat on the board of cellphone maker Motorola Inc.

In a note to clients, Merrill Lynch & Co. analyst John Murphy wrote that given Icahn's existing 23.6% stake in Lear, "he is benefiting materially from the run-up in the stock."

By Friday's close, Lear shares had risen about 60% since Icahn disclosed in October that he had upped his stake in the company to 16% of its shares outstanding.

Lear's results have suffered in recent years, reflecting troubles at its major customers -- the big Detroit automakers General Motors Corp., Ford Motor Co. and Chrysler Group.

Lear posted a 2006 loss of $707.5 million.

The company said in a statement that the takeover proposal called for Chairman and Chief Executive Bob Rossiter and the rest of senior management to remain with the company.

The bid appeared to provide a lift to the shares of several automotive component makers, with the Dow Jones U.S. auto parts index rising 0.9%.

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