Lear Corp., an automotive supplier of interior parts, said Friday it has agreed to be sold to billionaire investor Carl Icahn for $36 a share in a deal valued at $5.3 billion, including Lear's debt.
Under terms of the deal, Icahn-controlled American Real Estate Partners LP is paying $36 a share, and a Lear spokesman said that amounts to about $2.8 billion. It also includes the assumption of about $2.5 billion in debt.
The transaction is expected to be completed by the end of the second quarter. The Southfield-based company still may solicit alternative proposals up to 45 days from the final agreement.
"We believe the transaction price, which represents a multiple of about nine times our forecasted 2007 core operating earnings, excluding the interior business, provides shareholders with significant value," Lear CEO Bob Rossiter said in a statement.
Holders of a majority of the outstanding shares of Lear's common stock must vote on the agreement before it is approved. Icahn owns more than 11 million of Lear’s 76.3 million outstanding shares. But it's unclear how Lear's other shareholders will react.
Lear's second largest shareholder on Monday wrote a letter to Lear's directors saying that Icahn's offer is far too low and that the company's actual value is closer to $60 per share. Richard S. Pzena, co-chief investment officer of Pzena Investment Management LLC, urged directors to seek other offers.
"We would be happy if Lear said, 'We're not up for sale right now,' or we'd be happy if they sold it at a good price, but this doesn't make any sense," Pzena told the Free Press on Feb. 5.
Under terms of Icahn's offer, Rossiter and his' senior management team would keep their jobs.
"Lear is an excellent company with a strong management team in place," Icahn said in a statement. “We look forward to working with Lear's team to improve its long-term competitiveness, capitalize on growth opportunities globally and to build an even stronger and more valuable company in the future."
With annual sales of $17.8 billion in 2006, Lear ranks No. 127 on the Fortune 500. But Lear also reported a loss of $707.5 million, or $10.31 per share, last year.
The auto supplier reported a net loss of $645 million in last year’s fourth quarter, a 7% greater loss than the company's $602.6 million in the fourth quarter of 2005.
During the quarter, Lear reached an agreement with billionaire investor Wilbur Ross to transfer its North American interior business to a joint venture. In return, Lear received a 25% equity stake in the venture.
Lear's business with Ross is part of a restructuring plan to become leaner and to exit the auto-interiors business in favor of more profitable manufacturing, such as seats and electrical systems.