U.S. News

Lear Delays Vote on Icahn Takeover After Criticism


Lear, which has faced criticism for accepting billionaire Carl Icahn's $36-per-share buyout offer, delayed a shareholder vote on the deal until July 12, the auto parts maker said on Friday.

Lear shareholders had been scheduled to vote on the nearly $2.9 billion offer from Icahn's American Real Estate Partners on June 27.

Lear said it wanted more time to persuade investors of the merits of Icahn's offer, which proxy advisory firm Institutional Shareholders Services said they should oppose and a major stockholder, Pzena Investment Management LLC, has criticized as too low.

Icahn, Lear's largest shareholder, said on Friday he has no plans to raise the offer and criticized Pzena for previous share sales.

"I think it's a very fair bid and we have no intention of raising it," the billionaire investor said in an interview. "Let the shareholders decide.

"We're paying double what the price was back in September, and the risks that existed then still exist today," said Icahn, in particular the risk of a strike at General Motors.

Pzena, Lear's second-biggest holder with an 8.6 percent stake, has said the company is worth $60 a share.

But Icahn, citing regulatory filings, pointed out that Pzena has sold large amounts of stock, including a block of over 400,000 shares last year at just under $20 a share.

"One can only wonder why he would be doing that when he states it is worth $60," said Icahn of Richard Pzena, the firm's founder.

A Pzena official said the stock sales were consistent with its fiduciary responsibility to clients. Pzena manages some $30 billion, much of it in separate accounts on behalf of clients.

"We sold shares because clients liquidated accounts, had tax issues or took losses," said William Lipsey, managing principal. "As the stock went from $16 to $34, we were selling to reduce concentrations but continue to own 6.5 million shares."

Kirk Ludtke, auto analyst with CRT Capital Group, an investment bank in Stamford, Connecticut, suggested that the delay may be a tactic to win shareholder approval.

"They may have delayed it because they didn't feel they have the votes," Ludtke said. He also said it was possible Icahn might raise his bid slightly.

Lear general counsel Daniel Ninivaggi said the company delayed the vote to "set the record straight."

"There's been misinformation about what motivated the transaction," he said. "We want to set the record straight and make sure the shareholders have our perspective on it."

Ninivaggi said it was too early to count votes. "If we didn't have the votes, we would have waited until the meeting date and postponed or adjourned at the meeting," he said.

Lear said it had sought out higher bids, contacting 41 potential buyers, but received no offers.

The company also said it faced difficulties such as its dependence on weakening SUV and light truck sales, and that volatility and structural change in the auto industry were likely to continue.

Ninivaggi said the gap between supporters of the deal and its critics is due to a difference in beliefs about how troubled the auto industry is.

"We believe that Pzena and other critics of the deal are significantly underestimating the industry risk, particularly in North America, and at the end of the day shareholders have to decide whether they want to believe a money manager in New York or our board," he said.