Lear Corp. (LEA:US) rose the most in more than a year after an investor group said it may nominate directors and push the auto-parts maker to return more cash to shareholders.
Lear, based in Southfield, Michigan, gained 6.3 percent to $53.98 at the close in New York, the biggest one-day jump (LEA:US) since Feb. 3, 2012.
Investors (LEA:US) 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 (LEA:US).
“Notwithstanding the announcement,” the investor group said it 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 (LEA:US) 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 has increased 19 percent in the past 12 months compared with a 12 percent gain in the Standard & Poor’s 500 Index.
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