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Lear Accepts Sweetened Bid from Icahn; Pzena Not Swayed

Billionaire investor Carl Icahn's American Real Estate Partners raised its takeover offer for Lear to about $3 billion after shareholders balked at a previous buyout proposal, but the auto parts maker's second biggest shareholder remained unconvinced.

Pzena Investment Management LLC, which holds some 6.6 million Lear shares, or an 8.6 percent stake, said it plans to vote against investor Icahn's latest offer for the auto parts company, saying the company should remain independent.

Icahn, who said just weeks ago that he would not raise his offer for the auto parts maker, lifted it to $37.25 per share, from a prior $36 offer that proxy advisory firms and several shareholders called too low.

Lear's board accepted the earlier offer in February, but delayed a scheduled vote in June to try to persuade investors to reconsider Icahn's offer. It also accepted the new offer.

The rescheduled vote was set for Thursday, but postponed to July 16 with the announcement of the raised offer.

The bump up was not enough to sway Richard Pzena, head of the firm which has led opposition to the Icahn bid. Pzena is the second largest Lear shareholder after Icahn.

"We're voting against this," Pzena said in an interview. "We're not looking for an extra dollar."

Lear shares were up $1.05, or 2.9 percent, to $36.91 on Monday afternoon on the New York Stock Exchange.

Pzena, whose firm manages some $30 billion in investor assets, has maintained that Lear is worth $55 to $60 per share, well above the latest bid of $37.25 per share from Icahn's investment firm.

Larry McCurdy, Lear's lead independent director, said the original agreement was fair and in the best interest of Lear stockholders.

"The increased price makes the transaction even more attractive," he said in a statement. "We believe the revised price represents a meaningful increase in value for Lear stockholders, and we strongly encourage a vote in favor of the revised Merger Proposal."

Icahn is Lear's largest shareholder, owning about 16% of the company, or close to 12 million of the 76.3 million shares outstanding as of February 2.

The Icahn affiliate would be entitled to $12.5 million cash and 335,570 Lear shares valued at $12.5 million if stockholders do not approve the new offer by July 16. The termination fees would be credited against breakup fees outlined in the original deal if Lear accepts a different sale offer within a year.

Lear also agreed to increase the percentage stake Icahn affiliates could hold in the company to 27% from 24% should shareholders not approve the buyout.

Pzena also criticized the breakup fee.

"That is beyond belief to me that the company is saying, 'If you don't approve this, we have to pay Carl Icahn," said Pzena. "It is highly unusual and very coercive. It's saying to shareholders, 'If you don't do this, it will cost you."

"I don't really understand whose interests the Lear board is looking after here," said Pzena.

The California State Teachers' Retirement System also is among the Lear shareholders that had complained Icahn's previous offer was too low and said they would vote against it.

Influential shareholder advisory firm Institutional Shareholder Services also recommended a vote against the $36 per share offer, though it found Pzena's estimate too high.

Lear had minimal leverage to bargain for a higher offer since it received no other bids.

Lear, which produces automotive seating and electronics, has faced problems due to its dependence on sport utility vehicles and light trucks made by General Motors, Ford Motor and DaimlerChrysler's Chrysler Group. Those vehicles have suffered from weak sales.