Lear Corp.’s (LEA) share price fell 3.3% to $94.69 on Jan 5, 2015 due to the plunge in the market, even though the company announced the completion of the acquisition of Eagle Ottawa, the largest global supplier of premium automotive leather. Lear Corp.’s shares fell further to $94.38 on Jan 6, due to the impact of the overall market decline.
The company had announced the agreement to purchase Eagle Ottawa in Aug 2014. Lear Corp. paid $850 million for the deal, on a cash and debt free basis. The company financed the deal by raising debt, apart from using its cash in hand.
Auburn Hills, MI-based Eagle Ottawa was earlier owned by Milwaukee-based investment firm, Everett Smith Group Ltd. Its customers include many large automakers such as BMW, Chrysler, Ford Motor Co. (F), General Motors Company (GM), Honda Motor Co., Ltd. (HMC), Hyundai and Jaguar Land Rover, among others.
The acquisition of Eagle Ottawa will complement Lear Corp.’s seating business and increase premium leather capabilities. It will also diversify the company’s customer mix and enable it to provide significantly customized products. Further, it will provide sales and operating synergies to Lear Corp., and help it to improve the quality of products while simultaneously reducing prices.
Overall, the Eagle Ottawa acquisition is expected to boost Lear Corp.’s earnings per share by 5% in 2015, excluding the benefits from synergies. The company will reveal the guidance for the year next week at the North American International Auto Show in Detroit.
Currently, Lear Corp. carries a Zacks Rank #2 (Buy).
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