CORRECTED-UPDATE 2-Lear settles with activist investors, to boost buybacks

Mon Apr 1, 2013 12:11pm EDT

(Corrects Lear's cash and equivalents, as of Dec. 31, in paragraph 5 to $1.40 bln from $918 mln)

* Lear says would buy back $800 mln shares in next 12 months

* To start on new $750 mln buyback program soon after

* To increase board to nine members from eight

* Lear shares up 1.3 pct

April 1 (Reuters) - Auto parts maker Lear Corp avoided a proxy battle with investors Marcato Capital Management LLC and Oskie Capital Management LLC by agreeing to increase and quicken the pace of its share buyback program and add a board member.

The company, which repurchased $200 million of its shares in the first three months of 2013, said it would buy back the remaining $800 million in its program in the next 12 months. Lear had earlier said it would complete the program by the end of 2014.

Lear also said it would start on a new $750 million buyback program soon after the current plan ended.

"Over the past two years, Lear has returned more cash to shareholders through dividends and share repurchases as a percentage of our market capitalization than any of our automotive supplier peers," Chairman Henry Wallace said in a statement.

The company, which has a market value of more than $5 billion, had cash and equivalents of $1.40 billion as of Dec. 31 and no short-term debt balances outstanding. It had long-term liabilities of $1.37 billion.

"When you look at the financial impact of doing the repurchases, it will not put Lear at a compromised position," Guggenheim Securities LLC analyst Matthew Stover said.

Lear has the flexibility to invest in its own business as well as to pursue acquisitions, Stover said.

Southfield, Michigan-based Lear reported a fourth-quarter profit in February that beat analysts' expectations.

EXPANDING THE BOARD

Marcato - run by Mick McGuire, one of activist investor William Ackman's former partners - said in February it planned to nominate candidates to the board.

The shareholder reported a 5.2 percent stake in Lear then, but said in March it had raised that amount to 5.9 percent. (r.reuters.com/fyg46t)

Marcato and Oskie have withdrawn their slate and will support Lear's nominees, the company said on Monday, after it agreed to expand its board to nine from eight.

"We are very pleased to have worked constructively with Lear's management to reach this favorable outcome for all shareholders," Marcato Founder Mick McGuire said in a statement.

Marcato's other top holdings include GenCorp Inc, Cincinnati Bell Inc and DineEquity Inc. Spokesman Tom Davies declined to comment beyond the joint news release.

In 2007, Lear rejected a $3 billion buyout attempt by an affiliate of billionaire investor Carl Icahn.

Lear's shares were up 1.3 percent at $55.57 in morning trading Monday on the New York Stock Exchange. They have gained 8 percent since Feb. 8, when Marcato said it would nominate candidates to the board. (Reporting by Sagarika Jaisinghani and A. Ananthalakshmi in Bangalore; Editing by Sriraj Kalluvila and Saumyadeb Chakrabarty)