Investment firms want Lear to buyback more stock
SOUTHFIELD, Mich. (AP) — A pair of investment firms that hold a combined 5.6 percent stake in Lear Corp. said Tuesday that they want the auto supplier's management to boost value for shareholders by buying back more of the company's stock and reviewing its spending plans.
In a letter to Lear's board, Marcato Capital Management and Oskie Capital Management said they believe that the company is undervalued and blamed the "questionable" spending strategy of the company's board.
The firms pointed to the Lear's practice of "stockpiling" cash and said investors are concerned that Lear may make expensive acquisitions or invest in low-return projects, instead of using the cash for stock buybacks, which they say would improve the company's long-term value.
Southfield, Mich.-based Lear issued a statement later on Tuesday defending its spending strategy, saying it balances investments in the company with returning cash to shareholders.
In their letter, Marcato and Oskie called for the immediate start of a $2 billion stock buyback program, which they said would take advantage of the company's low stock price and establish a more appropriate capital structure.
They also demanded a review of Lear's capital spending budget and acquisition strategy, to make sure its cash is being directed to the areas that offer the best possible long-term returns.
Lear said it's speeding up the execution of its $1 billion stock buyback program, which is expected to result in the repurchase of about 20 percent of the company's outstanding stock, with $600 million in stock expected to be bought back this year.
The company also pointed to the recent 21 percent increase to its quarterly cash dividend.
Lear shares rose $1.06, or 2 percent, to $54.49 in afternoon trading. The shares have been rising steadily in recent months, gaining about 53 percent since the end of July.