Feb. 9 (Bloomberg) -- Lear Corp., a money-losing maker of car seats, accepted a $2.8 billion cash offer from billionaire Carl Icahn that some investors said is too low.

The $36-a-share proposal is $4.07 below the price of Lear's shares yesterday, when trading was halted because of pending news. Icahn already owns 16 percent of Southfield, Michigan- based Lear, whose shares had risen 16 percent through yesterday from the day before his Feb. 5 offer.

``We are certainly going to vote against it,'' said Richard Pzena, whose New York-based investment firm is Lear's third- largest investor, with an 11 percent stake. ``A big number of shareholders are going to lose money.''

Icahn will have to overcome opposition from three of Lear's six largest shareholders. In addition to Pzena, Lear's No. 4 and No. 6 investors, Brandes Investment Partners LP and Classic Fund Management AG, said they intend to vote to reject the offer.

A sale would make Lear the largest auto-parts maker to be taken private, said David Andrea, a vice president of the Original Equipment Suppliers Association in Troy, Michigan. Icahn joins investors such as Wilbur Ross who are bidding for control of troubled auto-parts companies.

Ross agreed last year to take over Lear's auto-interiors unit, once the world's largest. Lear lost a combined $2.1 billion in 2005 and 2006 as its biggest customers, General Motors Corp. and Ford Motor Co., slashed North American production.

Icahn's Motive?

Icahn, 70, Lear's largest shareholder, hasn't disclosed why he is interested in buying Lear. He built his reputation in the 1980s as a corporate raider, targeting big companies including Phillips Petroleum Co., Texaco Inc. and Trans World Airlines Inc.

Lear was rated a ``hold'' or ``sell'' by 16 equity analysts before the agreement was announced Feb. 5, according to Bloomberg data.

Shares of Lear dropped 68 cents, or 1.7 percent, to $39.39 at 4:02 p.m. in New York Stock Exchange composite trading.

The price on Lear's benchmark bond fell. Its perceived credit risk rose, and Standard & Poor's lowered its rating on Lear's debt further into junk.

Lear would pay Icahn's American Real Estate Partners, of Mount Kisco, New York, as much $85 million in cash and $15 million in expenses if its board accepts another offer, according to a U.S. regulatory filing. If Icahn backs out, he must pay Lear $250 million.

``Our board unanimously concluded that the AREP offer was in the best interests of Lear's shareholders,'' Lear Chief Executive Officer Robert Rossiter, 60, said in the statement.

``We believe that the transaction price, which represents a multiple of about nine times our forecasted 2007 core operating earnings -- excluding the interior business, provides shareholders with significant value,'' Rossiter said.

`Fully Valued'

Kirk Ludtke, an analyst with CRT Capital Group in Stamford, Connecticut, agreed. ``We think the company is fully valued at $36,'' he said.

Rossiter would become executive chairman of the company under a new three-year contract. Douglas DelGrosso, now chief operating officer, would succeed Rossiter.

``The bid seems low given the potential for continued improvement in performance at Lear over the next few years,'' said John Novak, a Morningstar Inc. analyst in Chicago.

``We wouldn't be surprised to see another bidder emerge, but with Icahn as the majority shareholder and management already on board with this bid, a new buyer faces some challenges.''

Classic Fund Management also intends to vote against the transaction, said Daniel Jordan, an analyst with Braun, von Wyss & Muller AG in Zurich, which handles the fund's investments.

`Happy to Wait'

``Considering Lear's prospects, we are happy to wait another year or so for the company to convince the stock market of its true potential, rather than cash out now at such a low price,'' according to a copy of the letter e-mailed to Bloomberg. ``Lear's own statements justify a value of $60 per share, a value that is consistent with our own analysis.''

Brandes and Evercore Asset Management LLC of New York said in separate statements that they plan to vote against the proposal because it undervalues Lear.

Standard & Poor's cut Lear's credit rating to five levels below investment grade, to B from B+. S&P warned it may cut the rating again.

John Murphy, an analyst with Merrill Lynch Capital Markets, said the termination clause in the acquisition agreement would make a competing leveraged buyout unlikely. Lear doesn't make sense as an acquisition for other suppliers, he said.

Icahn's Style

Icahn owns most of the debt of Federal-Mogul Corp., also of Southfield, scheduled to exit bankruptcy this year.

By acquiring stakes in companies including Time Warner Inc. and ImClone Systems Inc., Icahn has forced management to add new directors, boost buybacks or change strategies. A year ago, he unsuccessfully pressured Time Warner CEO Chief Richard Parsons to break up the company. He accepted board representation and a share buyback instead.

Icahn said Jan. 31 that he was seeking a seat on the Motorola Inc. board to pressure the mobile-phone maker to return more cash to investors by buying back stock.

In December, he made an unsuccessful offer of $4.3 billion in cash and stock for Reckson Associates Realty Corp. SL Green Realty Corp. bought Reckson last month for $4.5 billion.

Bonds

Lear's 8.75 percent bond due in December 2016 fell 25 cents on the dollar, yielding 9.09 percent, according to Trace, the NASD's bond-price reporting service. Standard & Poor's lowered its rating on Lear's debt further into junk.

The perceived risk of owning Lear's bonds rose today to the highest in more than three weeks. Credit-default swaps based on $10 million of Lear bonds rose 6.4 percent to $348,560, according to prices compiled by CMA Datavision in London.

An increase in the contracts, used to speculate on a company's ability to repay debt, signals a deterioration in the perception of Lear's credit quality. The contracts have risen 19 percent since Icahn made the offer, CMA data show.

The closing is expected to occur by midyear, ending Lear's 13 years as a publicly traded company, the company said in a statement. Lear may solicit alternative proposals from third parties for 45 days.

Lear traces its roots 1917 when American Metal Products began supplying seats to Detroit's cars makers. American Metal was purchased by Lear Siegler in 1962, and Lear Siegler was acquired by New York-based investment firm Forstmann Little & Co. in 1986. Forstmann offered the seating division to its management team, which included long-time Lear executive Kenneth Way.

Way took Lear Seating private in a $500 million leveraged buyout in 1988 and began acquiring other seat makers. Lear went public in 1994.

Four years later, after buying a German automotive seat maker, Lear purchased the seating unit of GM's Delphi Automotive Systems, giving it a large piece of GM's business.

Financial Stress

Financial pressures began to intensify on the company in 2005 as costs for oil-based products such as plastic rose. Lear, like other suppliers, couldn't pass the higher costs on to the automakers for fear of losing contracts.

Simultaneously, sales of U.S. automakers' sport-utility vehicles began falling as customers looked for more fuel- efficient vehicles. GM, Lear's largest customer, also decided it would buy parts individually rather than in the bundled packages Lear was offering.

The changes led Lear to post an annual loss in 2005 of $1.38 billion, its first since going public. CEO Rossiter also announced he would cut 7 percent of his global workforce, close 15 plants and sell off the interiors business. The interiors business was turned over to U.S. billionaire Ross last year.

In May 2006, Icahn announced that he had bought 2.63 million shares in Lear, a 3.9 percent stake, during the first quarter after the company's stock fell to an historic low of $15.60. In October, Icahn disclosed his plans to increase his ownership to 16 percent of the company. He also placed a representative on the board.

To contact the reporter on this story: Jeff Bennett in Southfield, Michigan, at jbennett17@bloomberg.net

Last Updated: February 9, 2007 18:34 EST