Billionaire Carl Icahn's sweetened $3 billion buyout offer for auto parts maker Lear has gained little traction among top advisory firms or shareholders ahead of a scheduled vote next week.
Influential advisory firm Institutional Shareholder Services on Tuesday joined Pzena Investment Management and the California State Teachers' Retirement System in opposing Icahn's new $37.25-per-share buyout offer for Lear.
All three had opposed an earlier $36-per-share offer from Icahn's American Real Estate Partners. Lear's board accepted both bids and recommends shareholder support.
Lear believes the deal was improved substantially by the new offer, despite a lack of competing bidders, and the vote remains scheduled for Monday, spokesman Mel Stephens said.
"The original proposal was fair. We think the revised terms, including an increase in price, make it even more attractive," Stephens said.
Pzena has argued Lear is worth $55 to $60 per share, while CalSTRS believes it is worth $40 to $50 per share. ISS believes the Pzena estimate is too high, but the current Icahn offer is too low.
Lear had delayed a shareholder vote on the earlier Icahn offer from June to this week to try to gain investor support, and then delayed the vote again to July 16 in negotiating the slightly higher terms of the new deal.
Lear would remain a stand-alone producer of automotive seating and electronics if shareholders vote down the buyout. It sold its auto interiors unit to a company led by billionaire Wilbur Ross, mainly for a stake in the Ross joint venture.
ISS said Lear and the automotive sector face significant challenges, but the auto parts maker's profile has not changed since the advisory firm's original analysis in mid June.
Southfield, Michigan-based Lear made 65 percent of its 2006 sales to General Motors, Ford Motor and DaimlerChrysler. North American market share losses by those automakers have pressured results.
Chris Young, the head of M&A research for ISS, said in a report the new offer still represented a meager premium over Lear's value as a stand-alone company, but said stockholders should not expect further offers from Icahn.
"Lear shareholders should not expect another bump from Icahn and, based on the failure of the go-shop to uncover any interest, they should not expect a near-term third party offer," Young added.
ISS and Pzena also raised concerns about a $25 million breakup fee Icahn would receive in cash and Lear stock should shareholders reject the buyout Monday. The terms also allow Icahn, Lear's biggest shareholder with a stake of about 16 percent, to increase his holding to 27 percent if his offer fails.
Icahn already is entitled to an $85 million breakup fee if Lear is sold to another bidder within a year. The $25 million would be credited against the breakup fee.
Lear shares were up 1 cent at $36.37 Wednesday on the New York Stock Exchange.