Saturday, February 10, 2007

Update on Lear

Carl Icahn's offer of $36 a share in cash was accepted by shareholders.Another number of reasons could explain this sudden acceptance despite pleas from other major shareholders (eg Pzena) that the stock was still undervalued.The drastic cutbacks in the US automotive industry due to restructuring and laying off of thousands of workers by Ford and GM has ensured pessimism over automotive -related stocks and depressed such stock prices.Thus shareholders opted for a quick and easy way out, after suffering months of sluggish performance,by accepting Icahn's offer even if Lear was severely undervalued.

However,recent news suggest that GM(the largest automobile manufacturer in the world), is on the verge of turnaround due to its restructuring plans .Lear ,being a supplier of automotive parts,would enjoy a favorable position if and when GM rebounds.Such a situation could explain why Icahn is confident enough to buy out Lear,given that a return to strong profitability is on the horizon.

According to the Schedule 13D/A filed by Carl Icahn, Lear will begin a "go shop" period of 45 days to look for potential bidders who can provide better financial terms .Given that most "go shop" end in failures, Lear being bought out again is not likely.However, Lear will be an interesting stock to follow in the coming months.

Wednesday, February 07, 2007

Lear Corp and Carl Icahn

Recently, famous shareholder activist Carl Icahn offered a buyout proposal to Lear Corp for $36 a share.Lear Corp, a supplier of automotive parts has been hit hard by the turmoil in the american automotive industry and whose stock price has been battered during the past year.However, the business is still profitable and another major shareholder, Richard Pzena, rebuked Icahn's offer of $36 a share as " low".Using his own valuation metrics, Pzena told other shareholders that the Lear's intrinsic value was roughly about $60 a share.Now , Pzena is well respected investor who follows a " Ben Graham " approach and known for his outstanding track record.However, the offer is also highly unusual for Carl Icahn who is known to buy sizable stakes in companies rather than buying out the company entirely.Clearly, Lear is undervalued and deserves more attention on investors' radar.Also, its shaping to be an interesting battle between these two respected investors and their schools of thought.