By Scott Malone
Reuters
Monday, February 5, 2007; 7:19 PM

BOSTON (Reuters) - Billionaire investor Carl Icahn on Monday said he offered to buy auto parts supplier Lear Corp. <LEA.N> for $36 a share in cash, or $2.43 billion, saying the company is poised for a turnaround amid a downtrodden auto sector.

Icahn, Lear's largest shareholder, said he agreed that if his offer succeeds, senior management of Southfield, Michigan-based Lear, including CEO Bob Rossiter, would stay with the company. But Lear said the offer is "subject to negotiation" and formal board consideration.

The offer fueled an 11.4 percent gain in Lear shares on the New York Stock Exchange. But some investors criticized the offer as well below what the company is worth.

Pzena Investment Management, which owns 11.1 percent of Lear, said in a publicly disclosed letter that it would oppose the offer if it came to a vote, saying Lear is worth "closer to $60 per share."

"We have long believed in Lear's business and its plan for recovery," said Pzena. "To claim today that $36 is a fair price is quite disingenuous."

Icahn, who made his offer through American Real Estate Partners LP <ACP.N>, a holding company he controls, defended his offer.

"We're not trying to do a low-ball bid here," said Icahn in an interview with Reuters. "Anyone can make a higher offer. It will be an open auction."

Icahn, whose auto sector investments include a large debt position in bankrupt parts supplier Federal-Mogul Corp. <FDMLQ.OB>, said he thinks Lear, which specializes in auto seating components, "is going to grow."

"I like to buy things that I believe are undervalued and are not in vogue," said Icahn. "This fits that criteria."

Lear shares surged on the news, up $4.22, or about 12 percent to $38.89 on the New York Stock Exchange, the highest they've been since mid-2005.

Shares closed at $38.64, up 11.4 percent, suggesting that investors feel a higher offer could come from somewhere else.

"Many investors are anticipating a higher bid to come in," said William Lefkowitz, options strategist at brokerage firm vFinance Investments, Inc. in New York.

He noted higher-than-normal interest in February and March calls that give the right to buy the company's shares at $40.

"We've been saying that the company is worth somewhere in the mid-$40s (per share), so it looks to be a good deal for him and not such a great deal for shareholders," said Morningstar equity analyst John Novak. "He's buying at a good time, the company has gone through a lot of restructuring."

Icahn's offer represents a 3.8 percent premium to Lear shares' closing price of $34.67 on the New York Stock Exchange on Friday.

The total deal value is calculated based on 67.4 million shares outstanding as of the company's last quarterly filing with the U.S. Securities and Exchange Commission.

Icahn is well known for pressuring the management of companies he invests in to improve performance to buy back shares. Last week he disclosed plans to seek a seat on the board of No. 2 cell phone maker Motorola Inc. <MOT.N>

In a note to clients, Merrill Lynch analyst John Murphy wrote that given Icahn's existing 23.6 percent stake in Lear, "he is benefiting materially from the run-up in the stock."

DETROIT TROUBLES

By Friday's close, Lear shares had run up about 60 percent since Icahn in October disclosed he had upped his stake in the company to 16 percent of its shares outstanding. Icahn declined to discuss his gains in the stock, which he bought through his hedge fund.

Lear's results have suffered in recent years, reflecting troubles at its major customers -- the big Detroit automakers General Motors Corp. <GM.N>, Ford Motor Co. <F.N> and the Chrysler unit of DaimlerChrysler AG. <DCXGn.DE>

The company's 2006 net loss was $707.5 million.

Lear last year agreed to sell its North American automotive interiors business to Wilbur Ross's International Automotive Components Group. The veteran financier makes a practice of buying up companies in troubled industries and merging them together.

The bid appeared to provide a lift to the shares of several automotive components makers, with the Dow Jones U.S. auto parts index <.DJUSAP> rising 0.9 percent.

(Additional reporting by Dane Hamilton in New York and Doris Frankel in Chicago)