) has signed an agreement to purchase Eagle Ottawa, the largest
global supplier of automotive leather. The company will pay $850
million for the deal, on a cash and debt free basis.
Lear Corp. will finance the deal by raising debt, apart from
using its cash in hand. The acquisition is expected to close in the
first quarter of 2015, subject to attainment of regulatory
approvals and fulfillment of other customary closing
Auburn Hills, MI-based Eagle Ottawa is currently owned by
Milwaukee-based investment firm Everett Smith Group Ltd. Its
customers include many large automakers such as BMW, Chrysler, Ford
Motor Co. (
), General Motors Co. (
), Honda Motor Co., Ltd. (
), Hyundai and Jaguar Land Rover, among others.
The acquisition 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.
Eagle Ottawa records sales of about $1 billion annually. In
comparison, Lear Corp. anticipates revenues in the range of
$17.6-$17.9 billion in 2014. Thus, the company expects the
acquisition to boost its annual earnings per share by about 5%.
Moreover, the acquisition is in line with Lear Corp.'s financial
targets. For instance, it is being made at fair market valuation
and is expected to be accretive immediately after closure. It also
conforms to the company's gross leverage target.
Currently, Lear Corp. carries a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
LEAR CORPORATN (LEA): Free Stock Analysis
GENERAL MOTORS (GM): Free Stock Analysis Report
FORD MOTOR CO (F): Free Stock Analysis Report
HONDA MOTOR (HMC): Free Stock Analysis Report
To read this article on Zacks.com click here.