CHICAGO (Reuters) - Lear Corp. (LEA.N) on Monday accepted an increased $3 billion takeover offer from billionaire Carl Icahn, but doubts remained as to whether the auto parts maker’s shareholders would support the new deal.
Icahn, Lear’s biggest shareholder, raised his offer to $37.25 per share from a previous $36 that proxy advisory firms and several shareholders called too low. Just weeks ago, Icahn stood firm against raising the offer.
The bump up by Icahn’s American Real Estate Partners LP (ACP.N) was not enough to sway Richard Pzena — head of Pzena Investment Management LLC, which that has led opposition to the bid — or the California State Teachers’ Retirement System.
“We’re voting against this,” Pzena said in an interview. “We’re not looking for an extra dollar.”
Pzena, Lear’s second-biggest shareholder with an 8.6 percent stake, believes Lear should remain independent and has maintained the company is worth $55 to $60 per share. Pzena’s firm manages some $30 billion in investor assets.
“We are glad they responded to our comments,” CalSTRS Chief Investment Officer Christopher Ailman said in a statement. “But it is still not enough.”
Ailman said CalSTRS believes Lear is worth $40 to $50 per share and still opposes the sale at $37.25.
Lear shares rose 99 cents, or 2.76 percent, to $36.85 on Monday on the New York Stock Exchange.
Lehman Brothers analyst Brian Johnson said Icahn’s new bid was likely a reaction to the real possibility of shareholders rejecting the buyout and “unlikely to move the needle much.”
“We believe the upcoming vote will still likely be a close call,” Johnson said in a research note.
Lear’s board has backed both the original $36-per-share offer and the $37.25 sweetened offer from Icahn, but had to delay a shareholder vote in June to try to persuade investors to give it their support as well.
In late June, Lear approached Icahn about increasing the offer, according to a filing with securities regulators. The new terms were reached after numerous discussions back and forth and the agreements were executed Monday morning.
The rescheduled vote was set for Thursday, but postponed again to July 16 after the raised offer.
Icahn owns about 16 percent of the company, or close to 12 million of the 76.3 million shares outstanding as of February 2.
Icahn’s firm 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 5 p.m. EDT on 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 percent from 24 percent 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,” Pzena said. “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.”
Influential shareholder advisory firm Institutional Shareholder Services also recommended a vote against the $36 per share offer, although it found Pzena’s estimate too high.
Lear, which produces automotive seating and electronics, had minimal leverage to bargain for a higher offer since it received no other bids during a go-shop period after the original deal was announced.
Lear remains dependent on sport utility vehicles and light trucks made by General Motors Corp (GM.N), Ford Motor Co (F.N) and DaimlerChrysler AG’s DCXGn.DEDCX.N Chrysler Group that have suffered from weak sales.
Additional reporting by Ben Klayman in Chicago, Jessica Hall in Philadelphia and Dane Hamilton in New York