Lear investor group seeks board seats to boost shareholder value
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DETROIT (Bloomberg) -- Lear Corp. shares rose the most in more than two years after an investor group said it would nominate directors and push the auto-parts maker to return more cash to shareholders.
Investors Marcato Capital Management LLC, founded by Mick McGuire, and Oskie Capital Management LLC said they intend to nominate directors at Lear's annual meeting this year.
The group, representing 5.6 percent of shares outstanding, said they spoke with management Feb. 6 about ways to boost shareholder value, including share repurchases. The next day, Lear said it would accelerate a buyback program and raised its dividend.
Shares in Lear, based in Southfield, Mich., closed the day at $53.98, up 6.3 percent, after earlier reaching $54.99 -- the stock's biggest jump since May 2010 and the highest price in 11 months.
The investor group plans to have further talks with Lear management, according to a regulatory filing today. The group, which didn't provide more details on the candidates they may propose for the board, said they bought shares in Lear because they deem the stock undervalued.
Lear said Feb. 1 its board increased a share-repurchase program by $800 million to $1 billion, to be completed over three years. Yesterday, Lear said it would buy $600 million worth of its shares this year and boosted the quarterly dividend 21 percent to 17 cents a share. Lear's enterprise value to sales is 0.28, the second-lowest among global auto suppliers, data compiled by Bloomberg show.
"The market has perceived management to have been lethargic in its actual repurchase of shares," Matthew Stover, an auto analyst with Guggenheim Securities in Boston, wrote in a research note titled "Let the Activism Begin". Including debt and an estimated $1 billion cash by year's end, Lear could return as much as $1.5 billion in capital to shareholders, said Stover, who recommends buying the shares.
Lear had increased 13 percent in the past 12 months through Thursday, compared with a 12 percent gain in the Standard & Poor's 500 Index.
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