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Lear reaches deal with dissident shareholders, expands buyback

By: By Dustin Walsh
CRAIN'S DETROIT BUSINESS

April 2, 2013

DETROIT -- In the midst of a proxy fight with dissident investors, U.S. supplier Lear Corp. announced an agreement with shareholders Marcato Capital Management LLC and Oskie Capital Management LLC to expand a stock buyback and keep the hedge funds' nominees off Lear's board.

Under the deal, the seating and electronic supplier, which counts Europe as its top sales market, will further accelerate its current $1 billion share repurchase program, buying back $800 million in stock over the next 12 months and starting a new $750 million share repurchase program over three years following the completion of the current plan.

In a phone interview with Crain's Detroit Business, Lear CEO Matt Simoncini said the compromise was fair and the accelerated and new repurchase program still leaves enough cash for acquisitions and other events.

"The one thing we [Marcato, Oskie and Lear] have in common is that we are all focused on shareholder value," Simoncini said. "We may have had different views on size and pace, but this is a nice compromise."

The agreement comes only a few weeks after Lear and the hedge funds engaged in a proxy fight over board nominees. Marcato filed with the U.S. Security and Exchange Commission to seat its founder Mick Maguire, Oskie founder David Markowitz and Enrico Digirolama, senior vice president at Allstate Insurance and former CFO at General Motors. Lear sought to reinstate its board.

Since the start of this quarter, Marcato and Oskie have urged Lear, publicly, to double the $1 billion stock repurchase program.

Lear initially reacted to the hedge fund demands in February by accelerating the buyback program and raising its quarterly dividend to 17 cents a share from 14 cents. Lear also said it would buy $600 million of its own shares this year as part of its $1 billion share repurchase program.

Compromise reached

But the dissident investors maintained a strong position and took their concerns public, insisting on new board members.

Lear conceded to compromise with the hedge funds after feedback from other shareholders, Simoncini said.

"I would tell you, if it was specific to just 5 percent stockholders, if it was an extreme position, we wouldn't have listened," Simoncini said. "Here, we listened to a lot of them. When we reached out, we realized there was more of the feeling in our shareholder base that we could increase our position."

Under the agreement, Marcato and Oskie have withdrawn their nominees for Lear's board, but the supplier will expand to a nine-member board with a "mutually acceptable" director, the company said in a news release.