Marcato Capital Managment & Oskie Capital File 13D on Lear ~ market folly

Monday, February 11, 2013

Marcato Capital Managment & Oskie Capital File 13D on Lear

Mick McGuire's hedge fund firm Marcato Capital Management just filed a 13D with the SEC regarding shares of Lear Corp (LEA).  Per the filing, McGuire's firm now owns 5.2% of the company with 5,034,986 shares (inclusive of common stock and options/swaps, as detailed below).

This was a joint filing along with David Markowitz's and Clive Rowe's hedge fund Oskie Capital, forming a filing 'group'.  Oskie owns 0.4% of Lear shares.

This is a brand new position for McGuire's fund, who are known for their activist investment strategy.  The filing was disclosed due to portfolio activity on February 6th.

Activist Plans

Per the fine print of the filing, the hedge funds have recently discussed the capital allocation practices of the company.  They also plan to nominate director candidates.  The company recently announced that it was accelerating its share repurchase plan and increasing its dividend.  The hedge funds still plan on nominating directors and engaging in discussions with management.

Breakdown of Position

Marcato's position is slightly more complex than just owning equity outright.  They have the right to purchase 2,383,440 shares via call options with strikes ranging from $0 to $55 and exercise dates from March 2013 to February 2015.

They also hold options to sell 1,997,180 shares with strikes ranging from $25 to $40 with exercise dates ranging from March 2013 to February 2015.  Additionally, they've entered into swaps with the number of shares specified in such swaps totaling 618,040.

Oskie also holds options to purchase 200,000 shares via call options with strike prices of $50 and expiration dates ranging from February 2013 to March 2013. You can view the specifics of all these transactions at the bottom of the filing here.

Per Google Finance, Lear is "a tier 1 supplier to the global automotive industry. The Company supplies its products to automotive manufacturers with automotive seat systems and related components, as well as electrical distribution systems and related components. The Company has two segments: seating and electrical power management systems (EPMS). The seating segment includes seat systems and related components, such as seat frames, recliner mechanisms, seat tracks, seat trim covers, headrests and seat foam."

For more on McGuire's hedge fund, we've detailed Marcato Capital Management's portfolio activity here as well as a pitch from McGuire on three of his holdings.

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