Two of Lear Corp.'s (LEA) shareholders have stepped up their
efforts to nominate new members to the company's board, calling a
recently announced accelerated share-repurchase program and a
dividend raise "insufficient."
In a letter to the board dated Tuesday, Marcato Capital
Management LLC and Oskie Capital Management LLC--which have a stake
of about 5.6% in Lear---said they share the company's view that the
maker of automotive-seating systems and electric systems is
undervalued and see "a serious discrepancy between Lear's improved
operating performance and business prospects and its current market
valuation."
Lear shares have climbed 21% over the past 12 months, putting
the company's market value at $5.18 billion. Shares were up 1.7% to
$54.34 in recent trading Tuesday.
The shareholders late last week said they would push forward
with their plans to nominate a slate of board candidates
notwithstanding Lear's actions unveiled Thursday to speed up the
pace of its $1 billion stock-buyback program and raise its
quarterly dividend 21% to 17 cents a share.
In the latest letter, the shareholders said Lear's "current
undervaluation reflects investors" distaste for the company's
practice of stockpiling an increasing net cash balance, along with
concern that the company, may be willing to make costly
acquisitions or invest in other low-return projects at a time when
the repurchase of Lear's undervalued stock would be far more
accretive to the long-term equity value of the company."
They called the board's choices regarding capital allocation
"parsimonious," adding these are "even more disappointing in light
of the positive operational progress the management team has made
during and since emerging from Chapter 11."
Lear in a statement said the company is focused on creating
value for all of its shareholders.
"We have a balanced strategy of investing in our business while
maintaining a strong and flexible balance sheet and returning cash
to shareholders," the company said, noting the acceleration of its
repurchase program and increased dividend are consistent with this
strategy.
The shareholders asked for an immediate $2 billion
share-repurchase program as well as a review of the company's
growth capital-expenditure budget and acquisition and divestiture
strategy.
Lear exited bankruptcy protection in November 2009 after cutting
its debt obligations and shedding thousands of workers. Those deep
cuts have helped the bottom line, but weaker sales in Europe have
contributed to the company's mixed financial performance over the
past year.
The company this month said its fourth-quarter earnings surged
as it recorded a massive tax benefit.
--Nathalie Tadena contributed to this article.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
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