Lear's 1st-quarter profit more than doubles to $49.9 million

By From freep| Apr 27 2007
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Lear Corp. more than doubled its profit from last year's first quarter, giving fuel to critics who say the auto-parts maker is worth more than the $36 a share it expects to get from a sale to billionaire Carl Icahn.

Lear reported a $49.9-million profit Wednesday after three straight quarterly losses. The results beat analysts' estimates and prompted the Southfield company to raise its profit forecast for the year.

The gains stemmed from improved margins in Lear's primary business -- automotive seats. Those advances alone are "enough to justify a fair value for the stock well above Icahn's $36 offer," Brian Johnson, an automotive analyst with Lehman Brothers Inc. in Chicago, said in a note to clients.

The primary opponent of the deal, No. 2 shareholder Richard Pzena of Pzena Investment Management, argues that Lear may be worth as much as $60 a share in two years as the U.S. auto-parts business revives. He's lobbied other shareholders to vote against the $5.3-billion sale and has the support of the company's third-biggest and sixth-biggest shareholders.

Lear shares rose $1.44, or 4%, Wednesday to $37.10.

Shareholders will vote on Icahn's proposal June 27 at Lear's annual meeting. Lear's board and management, led by CEO Bob Rossiter, back the sale. Icahn's American Real Estate Partners LP has a 16% stake in Lear and is its largest investor.

Lear's net income rose to 64 cents a share, from $17.9 million, or 26 cents, a year earlier, Lear said Wednesday. The results exceeded the 22-cents-per-share expectation of 11 analysts compiled by Bloomberg.

Lear President Doug DelGrosso said in a call with analysts that there is a "possibility" Lear may get a better proposal before the vote. The company hasn't received any offers, he said.

The deal calls for cash and assumed debt.

Lear continued to talk to interested parties that contacted the company during a 45-day marketing period that ended March 26, Rossiter said during the call.

Lear revised its 2007 forecast, saying profit before expenses and other costs will be $580 million to $620 million. That is a $20-million increase over the prior forecast, based on improved international operations.

"They did exceed expectations, but I don't think it will be enough to reduce the probability that a deal happens," said Kirk Ludtke, an analyst with CRT Capital Group LLC in Stamford, Conn.

After the $17.9-million first-quarter profit a year ago, Lear lost $725 million over the next three quarters as Detroit automakers cut production of trucks and SUVs.
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