July 9 (Bloomberg) -- Carl Icahn raised his bid for Lear Corp. by 3.5 percent to $2.9 billion after opposition from investors. The auto-parts maker delayed a vote on the sale again, by four days to July 16.

Lear's board approved the amended agreement with Icahn's American Real Estate Partners LP, the Southfield, Michigan-based auto supplier said in a statement today. The revised offer is $37.25 a share, up from $36, or $2.8 billion, Lear said. Icahn also would get a $25 million breakup fee if his proposal fails.

The higher payout by Icahn, Lear's biggest shareholder, failed to sway Pzena Investment Management LLC, the second largest and a leader among investors who felt the earlier bid was too low. Advisory firms Institutional Shareholder Services Inc., Proxy Governance Inc. and Glass Lewis & Co. also recommended against the previous plan.

``It's nice that we get an extra dollar, but it's not enough for us to vote for it, and I don't think it will be enough to sway any of the long-term players,'' Richard Pzena, chief of New York-based Pzena Investment Management, said in an interview.

Lear, the world's second-largest maker of auto seats, has ``met and talked with a number of shareholders and I think addressed many of their concerns,'' Daniel Ninivaggi, the company's general counsel, said in an interview. ``A good deal has become even better, and we expect broad shareholder support.''

On June 22, Icahn said he wouldn't raise his bid for Lear after the advisory firms' recommendations. The billionaire investor said in an interview that day that Lear shareholders ``might be doing me a favor'' by rejecting the $36-a-share offer.

Icahn didn't return a call seeking a comment.

New Terms

The breakup fee in the revised proposal is $12.5 million in cash and 335,570 shares of Lear stock, valued at about $12.5 million. Icahn also would be allowed to own as much as 27 percent of the shares outstanding, rising from a limit now of 24 percent.

His stake was 12 million shares, or almost 16 percent, as of May, according to data compiled by Bloomberg. Pzena held 6.6 million, or 8.6 percent, as of March.

Shares of Lear rose 99 cents, or 2.8 percent, to $36.85 at 4:04 p.m. in New York Stock Exchange composite trading, and have gained 25 percent this year. American Real Estate Partners rose $1.63, or 1.6 percent, to $104.55. Ichan owns 90 percent of the shares of the Mount Kisco, New York-based company.

``The stock continues to trade as if the existing offer is adequate,' said Kirk Ludtke, an analyst at CRT Capital Group LLC in Stamford, Connecticut, who rates Lear ``fairly valued.''

Still, the price may not accurately reflect shareholders' intentions, he said. Only those as of May 14 are eligible to vote, so the price may reflect people or groups trading in the stock since then, Ludtke said.

Shareholder Vote

After the advisory firms released their recommendations, Lear postponed the shareholder vote from June 27 to July 12 to gain time to present the company's response. Lear today said it planned to convene the shareholder meeting on July 12, then immediately adjourn it until July 16. Both gatherings will be in Wilmington, Delaware.

Lear worked hard to get a better offer from Icahn, Ninivaggi said. Icahn requested the higher limit on his stake in the company as part of the revised deal, Ninivaggi said.

``I think he feels that if the transaction doesn't go through, he'd like the ability to remain a significant shareholder,'' Ninivaggi said.

Two Years of Losses

The auto-parts maker lost a total of $2.1 billion in 2005 and 2006 and reported net income of $49.9 million in this year's first quarter. Lear has struggled as U.S.-based automakers General Motors Corp. and Ford Motor Co. reduced North American production because of market-share losses to Asian rivals led by Toyota Motor Corp.

Buyout firms and investors such as Icahn and Wilbur Ross have been acquiring auto-parts companies and assets in a bet that they can restore or increase profits.

Pzena and some other major Lear shareholders have argued that the company shouldn't be sold because the stock may rise as high as $55 to $60 in two years. Icahn made his initial offer in February, and Lear's board agreed to it later that month. The company has said it found no higher bids after contacting 41 potential buyers.

Icahn's $1.25-a-share increase for Lear adds about $100 million to the offer. The largest advisory firm, ISS, had said the $36-a-share offer was ``reasonable,'' while not providing a big enough control premium.

The two other advisory firms both said that the offer was too low and expressed concern that Lear Chief Executive Officer Robert Rossiter had a potential conflict in the negotiations. The agreement called for Rossiter to collect $12.5 million in retirement benefits over two years while still working at Lear.

Delaware Chancery Court Judge Leo Strine Jr. said in a ruling in a shareholder lawsuit that Rossiter acted in the best interests of the company.

To contact the reporter on this story: Mike Ramsey in Southfield, Michigan, at mramsey6bloomberg.net

Last Updated: July 9, 2007 16:24 EDT