Icahn Offers To Acquire Rest Of Auto Parts Company

After placing a big bet on the beaten-down auto parts business in October, Carl C. Icahn is doubling down.

Mr. Icahn, who recently spent $200 million to increase his stake in Lear to nearly 16 percent, has offered to acquire the entire company, Lear said yesterday in a statement.

American Real Estate Partners, which Mr. Icahn controls, will offer $36 a share in cash for Lear, valuing it at about $2.4 billion based on the number of shares outstanding on Nov. 3. The offer was almost 4 percent more than Lears closing price of $34.67 on Friday.

Mr. Icahn is the latest private equity investor to put money into the auto parts industry, which has been battered by troubles at the three American automakers.

An investor group led by Appaloosa Management and Cerberus Capital Management is offering to invest $3.4 billion in Delphi, which is operating under bankruptcy protection. Wilbur L. Ross, the billionaire financier who (quite profitably) bought coal and steel makers out of bankruptcy when those industries were suffering, agreed to buy Lears automotive interiors division last year.

Mr. Icahn has already seen a return on Lear. He bought nearly 8.7 million shares in November for $23 each, according to regulatory filings. Since then, Lears shares have surged more than 60 percent.

Lear said yesterday that Mr. Icahns offer was still subject to negotiations, adding that the companys board will consider the merits of the offer once talks have concluded.

Mr. Icahns firm said in a regulatory filing that the two parties are attempting to come to an agreement on the terms and conditions and cautioned that a transaction might not happen.

While Mr. Icahn has often criticized the management at companies he believes are underperforming, there was no indication that he planned any shake-up at Lear. The company said yesterday that Mr. Icahns proposal would call for senior management, including Lears chairman and chief executive, Robert E. Rossiter, to remain.

One major shareholder of Lear on Monday urged its board to reject Mr. Icahns offer. The shareholder, Pzena Investment Management, which in December reported owning an 11 percent stake in Lear, sent a letter to Lears independent directors stating that the $36-a-share bid was far below the fair value of the company. Pzena said Lears earnings would recover strongly and that its stock was worth closer to $60 a share.

We are well aware of Wall Streets short-term mentality and the pressure it can bring on companies, Pzenas co-chief investment officers, Richard S. Pzena and John P. Goetz, said in the letter. It is our hope that Lear does not succumb to that pressure and sell the business for less than it is worth over the long term.

However, a Citigroup analyst, Jon Rogers, said in a research note yesterday that the deal looked fair for Lear shareholders, given that any recovery seemed to be already accounted for in its share price.

Investors yesterday seemed to expect that a higher offer would materialize. Shares of Lear closed up $3.97, an 11 percent gain, to $38.64, exceeding Mr. Icahns offer.

Shares of other auto parts manufacturers jumped yesterday after news of the Icahn bid. American Axle and Manufacturing Holdings stock was up 5 percent, and ArvinMeritor gained 4 percent.

Mr. Icahn has been active on several fronts lately. Last month, he indicated that he planned to seek a seat on the board of Motorola, arguing that the company should return some of its large amount of cash to shareholders.

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