Marcato Capital Management Pushing for Breakup of Lear

Feb 3 2015 | 3:52pm ET

Marcato Capital Management is calling for a break up of auto supplier Lear, three years after the activist firm took a hefty stake of in the company.

On Tuesday, Marcato founder Mick McGuire said in a letter to Lear chief executive Matt Simoncini that the auto supplier should split its electrical division and its seating division into two separately traded public companies.

McGuire said that doing so would trigger a combined share value of $145, a 45% boost from current price levels.

"Given the substantial value to be created by a separation, we believe it is the board's and management's responsibility to explore the opportunity," he wrote, before stating that today’s share price is significantly undervalued and “well below what is readily achievable."

For its part, the company responded in a statement. "The board and the management at Lear takes all input from our shareholders very seriously and of course we will evaluate his proposal," a company spokesman said. "We believe we're following a balanced strategy that includes investing in our business, pursuing complementary acquisitions, maintaining a strong and flexible balance sheet, and returning cash to our investors."

This isn’t the first time that activists have targeted Lear. In 2007, the company defeated a near-$3 billion buyback offer from group tied to Carl Icahn. In 2013, the firm avoided a proxy fight with both Marcato and Oskie Capital Management by adding a new director to the board and boosting its stock-buyback program.

Mick McGuire, a former protégé of Bill Ackman at Pershing Capital Management, started Marcato in 2010. The San-Francisco-based firm manages roughly $3 billion in assets and returned 5.3% to investors in 2014.


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