Lear, the car interiors group, on Friday agreed to be bought for $5.3bn including debt by Carl Icahn, the veteran activist investor, in a deal is likely to face intense shareholder opposition.
Mr Icahn, who owns a 16 per cent stake in Lear, will pay $36 per share for the company, which has been struggling amid turmoil at its biggest clients: General Motors, Ford and DaimlerChrysler.
Lear shares were trading above $40 per share this week, after Mr Icahn made an approach through American Real Estate Partners, one of his investment vehicles. On Friday morning, they fell 4.1 per cent to $38.42 amid disappointment that the company had failed to secure a higher price.
Mr Icahn’s deal to buy Lear marks a rare instance in which the financier - who built his name as a corporate raider in the 1980s - has acted with the backing of a company’s board and management. Although Mr Icahn frequently campaigns against his targets’ strategies and sometimes makes bids for the entire companies, he rarely ends up controlling them.
Bob Rossiter, Lear chief executive, on Friday defended the deal with Mr Icahn, saying it was a result of a “very thorough review”. “We believe that the transaction price...provides shareholders with significant value.” But Pzena Investment Management, Lear’s second largest shareholder, quickly stated its opposition to the transaction, saying the company was worth about $60 per share.
Lear will be able to solicit alternative bids for the company for the next 45 days because of a “go-shop” clause in the merger agreement. JPMorgan is advising Lear.
Before his takeover bid for Lear, Mr Icahn had already made investments in the car parts sector. He has the right to buy a controlling stake in Federal-Mogul, another big Detroit-based parts maker that is likely to emerge this spring from more than five years in Chapter 11 protection.
Mr Icahn has also disclosed an investment in the debt of Dana, an Ohio-based maker of chassis, engines and axles also currently in the throes of a court-supervised restructuring.
Several analysts said on Friday that competing bids for Lear from other parts suppliers, such as Johnson Controls, Canada’s Magna International and Faurecia of France, appeared unlikely. However, Himanshu Patel at JP Morgan said that interest from other private-equity firms could not be ruled out.
Standard & Poor’s on Friday lowered its rating on Lear on the grounds that the Icahn acquisition would add to its existing $3.7bn debt burden. The rating agency said that the woes of the north American automotive industry had offset Lear’s strong market position and good growth prospects outside north America.
