Lear Corp. shareholders rejected a $2.9-billion buyout offer Monday from a firm led by billionaire investor Carl Icahn, mounting enough opposition amid concerns that the bid undervalued the auto parts supplier.
Icahn's American Real Estate Partners had improved its offer in the last week to $37.25 a share, but some shareholders said Lear was worth far more and questioned whether the deal was in their best interest.
"It's a clear message to the management that the company belongs to its shareholders, not to you," said Richard Pzena, the head of the second-largest shareholder who rallied opposition to the deal.
Robert Rossiter, Lear's chief executive, said that senior management felt "in our hearts that we did the absolute best job for our shareholders" but the decision had "not changed anything that Lear will do, has done or will ever do."
Icahn, the company's largest shareholder with about 16% ownership, did not attend the meeting and it was unclear how he would proceed.
Icahn's group still is entitled to $12.5 million in cash and 335,570 shares of Lear common stock, under an agreement reached before the vote. The company also agreed to increase the Icahn group's share ownership limitation from 24% to 27% of the company's outstanding common stock.
Shares of Lear dropped sharply following the news Monday, but quickly recovered to close up 60 cents at $37.50.
The proposed sale would have paired another private equity firm with an auto supplier at a time of major restructuring within the auto industry. Icahn is no stranger to the industry -- he is a major bondholder in Federal-Mogul Corp. and last year acquired about $101 million in debt in Dana Corp., which is under Bankruptcy Court protection.
Executives of Lear, a Southfield, Mich.-based maker of seats and electronic systems, said the original offer of $36 a share was in the best interest of Lear shareholders and the sweetened deal made the transaction even more attractive. Icahn's original offer represented a premium of about 4% over the stock's value at the time it was made in February.
Opposition had been mounting from Pzena Investment Management, the California State Teachers' Retirement System and others. Three major shareholder advisory services, meanwhile, last week reaffirmed recommendations that shareholders vote against the bid.
Proxy Governance, one of the advisory services, raised concerns about Rossiter's objectivity and willingness to consider all options. It also cited improvements in the industry that led to its doubts that the deal was in shareholders' best interests.
Lear has 90,000 employees at 236 facilities in 33 countries.