Lear shareholders reject Icahn deal

With billionaire financier Carl Icahn teaming up with Lear Corp.'s top executives to take the company private, it should have been a slam dunk.

But in a demonstration of shareholder democracy that stretched over five months, other investors blocked the sale.

The results of the vote, announced Monday afternoon at a special shareholders meeting, leave some questions about the future of the company and its largest share-holder: Will the stock rise or fall? Will Icahn try again to takeover the company? Will he cash out his stock and move on to another target?
Only time will tell.

But for now Lear, in the midst of a global restructuring of its business, remains publicly traded, stand-alone Michigan business, dueling with Johnson Controls Inc. as the world's leading seatmaker.

Shareholders of Lear Corp. on Monday defeated an attempt to take the Southfield-based automotive seat maker private in a plan that not only had the blessing of management, but also the financial backing of billionaire investor Carl Icahn - a combination that should have made approval a formality.

The decision, which concludes a heated five-month proxy battle, comes just as auto suppliers begin to report their performance for the second quarter.

"Hopefully the company will focus on doing what they've always done well, which is running their seating business," said Richard Pzena, founder of Pzena Investment Management, Lear's second largest shareholder and the most vocal opponent of Icahn's proposal.

"Deals are the last thing the company needs."

Lear CEO Robert Rossiter said Monday that he plans to stay with the company as it tries to succeed amid the turmoil of the U.S. auto industry.

"We are going to face more distress in the market," he said Lear CEO Robert Rossiter after a meeting that drew only a crowd of 27: with two shareholders and several Lear officials.

"I think the big key for us in the future is gaining more and more share with non-North American producers," he said.

In coming days and weeks Lear is expected to release the vote tally, which could offer an indication of shareholders' confidence in management. Also due are Lear's second quarter earnings, for which the company recently raised expectations.

At least for a while, No matter what, Icahn, a famous and unpredictable in vestor, will own more shares of Lear. Shareholders' rejection Monday triggered a plan that gives Icahn an estimated $12.5 million in Lear shares and the chance to own as much as 27 percent of the company's shares.

American Real Estate Partners LP, the investment group mostly owned by Icahn that made the offer for Lear, said that his offer was "over twice the price that Lear stock traded at approximately one year ago."

"Mr. Icahn stated that he and his affiliates continue to be large stockholders of Lear and that he wishes the company well," the statement said.

At least on Monday, Icahn and other Lear shareholders benefited when the stock closed at $37.50, up 60 cents or 1.6 percent - higher than Icahn's most recent offer.

Meanwhile, shares of American Real Estate Partners, which the Icahn company that would have acquired Lear, dropped $5.95, or 5.7 percent, Monday to close at $97.70.

From the early days of this takeover attempt in February, Pzena has said that Lear's shares are worth more like $50 to $60. That's nearly double Icahn's offer - originally $36 per share, later raised to $37.25 per share.

Pzena's call for rejection was strengthened in the last two months when three investor advisory services recommended that shareholders vote against the bid.

Vincent Intrieri, senior managing director at Icahn Partners, and Icahn's appointee to Lear's board, declined to say what Icahn's group would do next. Icahn could sell his shares and make millions on his stake, which he started buying in March last year, when the company's shares were trading between $16.01 and $20.77 a share.

But Icahn, already Lear's largest shareholder, could also raise his stake to a new limit of 27 percent in the company.

The higher limit is a sign that Icahn will stay involved in Lear, said Sudip Datta, a finance professor at Wayne State University. "I think he will be back with another bid on the company," Datta said.

The best indicator of that could be the vote tally, said Kirk Ludtke, an analyst with CRT Capital Group in Stamford, Conn. "If it's close you could conceivably see Icahn come back in relatively short order or I think you could see another buyer step up," Ludtke said. "If it's not close, then I think that would suggest that the deal is obviously a lot less likely over the near term."

Amid the controversy over the price, investor advisory services noted that Rossiter, whom a special committee of Lear's board tapped to negotiate the deal, may have had a conflict of interest.

Rossiter and two other top Lear executives would get early access to multimillion-dollar retirement accounts if the deal is approved.

Lear on Monday said it was confident that the process was fair. "We do believe that the evaluation process was comprehensive and unbiased," said Larry McCurdy, a Lear board member, who led the special committee that oversaw the negotiations. McCurdy noted that there were no other bidders to consider and that the board has faith in management.

Pzena declined to say if he would make any efforts to oust management or start litigation over the termination package, which is unusual in acquisitions decided by shareholders.

But he said that Monday's vote empowered all investors: shareholders at not just Lear but other public companies. Pzena said: "I've gotten calls from shareholders who have nothing to do with Lear who have said 'Thank you for doing this.

source:zanesvilletimesrecorder.com