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Valeo studied Visteon tie before rejecting merger

From Automotive News| April 13,2007

French car parts group Valeo made a high-level study of a possible tie-up with Visteon Corp. prior to deciding that an all-out merger would carry too much risk, the company's annual report showed.

The document, available on the Valeo Web site (www.valeo.com), shows that the board in October 2006 authorized a payment of $200,000 to board member Yves-Andre Istel for a study into a possible merger between Valeo and Visteon.

A company official said the study had been finished by then as Valeo was mulling making an approach for Visteon in the summer of that year, but dropped the idea.

CEO Thierry Morin has since signaled that Valeo would be interested in looking at any assets that Visteon or Delphi Corp. may put up for sale, but would not buy the entire company.

Istel, based in New York, resigned from the Valeo board at its Tuesday, April 10, meeting. Born in 1936, he is a senior adviser of Rothschild Inc., where he was vice chairman after having worked with CSFB and Wasserstein Perella.

He had been a Valeo board member for over 12 years

"The conclusion of the study was that we would not do it," the company official said.

PARDUS PRESSURE

Pardus Capital Management, which recently raised its stake in Valeo to 13.4 percent and is the biggest single shareholder, is putting pressure on Valeo to link up with Visteon in which Pardus has a 17 percent stake.

The Valeo board on Tuesday drew up a slate with new members and said it would propose the re-election of four of the 11 member board. There is a shareholder meeting on May 21.

The board added it was continuing to study strategic options after an unnamed investment fund had made an offer approach.

Morin is likely to be questioned over any leveraged buyout plans when he presents first-quarter sales on April 25, and certainly when he chairs the shareholder meeting in May.

Meanwhile, Le Monde newspaper said on Wednesday, April 11, that Morin had presented the board with a leveraged buyout plan backed by Apollo Investment Corp.

The Les Echos paper said today that other investment funds had also approached Valeo and named Cerberus Capital Management and PAI Partners. It said PAI planned an offer of 40-44 euros. Automotive News also reported a PAI bid at 40-44 euros, citing a source familiar with the matter.

PAI had no comment and at Cerberus there was no immediate comment. A Valeo spokeswoman also had no comment.

Guy Wyser-Pratte, an activist investor who urged Valeo not to make acquisitions but instead sell some 30 percent of activities and boost profitability, last week sold a stake of some 3 percent because he expected the board to accept and LBL bid which he expected to be no higher than 44 euros.

The Valeo document also showed that France's CDC has a 6.5 percent stake, Boston Company Asset Management 5.4 percent and Brandes Investment held 5.3 percent at Feb. 12.

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