Lear Corporation, a global supplier of automotive seating and electrical distribution systems, has signed a definitive agreement to acquire Eagle Ottawa.
Eagle Ottawa is the world's largest supplier of automotive leather with annual sales of approximately $1 billion. It is a 150-year-old company with private ownership for nearly 50 years. The company says it has an experienced management team, modern facilities, a low-cost footprint and diversified customers. Eagle Ottawa will complement Lear's position in luxury and performance automotive seating.
The transaction is valued at $850 million on a cash and debt free basis. Lear intends to fund the transaction through a combination of cash on hand and debt. The closing of the transaction is expected to occur in the first quarter of 2015 subject to customary conditions, including regulatory approvals. Lear expects the transaction to be approximately 5% accretive to annual earnings per share upon closing.
"The acquisition of Eagle Ottawa is another important step in strengthening our core seating business, expanding our component capabilities and accelerating profitable sales growth," said Matt Simoncini, Lear's President and CEO. "This transaction will further enhance Lear's position as a global leader in automotive seating and will create significant value for our shareholders. Eagle Ottawa adds global leather design and development resources as well as technical expertise to our existing surface materials capabilities. Eagle Ottawa will also enhance the level of craftsmanship and design options that we are able to provide to our customers and increase opportunities for sales growth and diversification."
Eagle Ottawa said it has a balanced geographic customer mix, with an industry leading position in North America and Asia and also is a top supplier in Europe. Eagle Ottawa has strong relationships with virtually all of the major global automakers, including BMW, Daimler, Fiat Chrysler, Ford, General Motors, Honda, Hyundai, Jaguar Land Rover, Mazda, Renault/Nissan and Toyota.
The acquisition of Eagle Ottawa fits Lear's previously stated acquisition strategy and financial targets:
Strategic Fit
• Strengthens Lear's Seating business with increased component capabilities
• Complements Lear's existing seat fabric and cut-and-sew operations
• Provides Lear with additional premium leather capabilities
• Enhances craftsmanship and Lear's ability to offer a high level of customization
• Provides opportunity for incremental sales growth
• Further diversifies Lear's customer mix
• Consistent with Lear's capital allocation strategy to invest for profitable growth, maintain a strong and flexible balance sheet and return cash to shareholders
Supports Lear's Financial Targets
• Acquisition made at a fair market valuation and expected to be immediately accretive
• Consistent with Lear's stated gross leverage target of 1.5x EBITDA
• Lear intends to continue to return cash to shareholders; at the end of the second quarter, Lear had approximately $600 million in remaining share repurchase authorization.
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