Lear Corporation (NYSE:LEA) shares moved down $1.01, or 2.52%, to $39.06 today after the company formally accepted Carl Icahn's offer to purchase the company for $36/share in cash. Why is Lear trading significantly above the buyout premium at over $39 per share? Well, many investors are saw the statement from Deutsche Bank analyst Rod Lache, where he said he believes the deal undervalues Lear and that he found it surprising the company agreed to sell itself at a discount from its current price. Other point to strong opposition voiced by Pzena Investment Management, who said a couple of days ago that the company's real value is closer to $60 a share with earnings likely to recover to $4 a share in the next few years.

According to the Schedule 13D/A filed by Carl Icahn today:

On February 9, 2007, newly-formed subsidiaries of AREP entered into an Agreement and Plan of Merger with Lear Corporation ("Agreement") calling for a merger of Lear and one of such subsidiaries pursuant to which Lear will become a subsidiary of AREP and stockholders of Lear will receive $36 per share in cash. The Agreement provides that Lear will immediately commence a "go shop" period of 45 days pursuant to which it will seek buyers for Lear who may offer better terms and conditions from a financial point of view. The Agreement provides that in the event of termination of the Agreement under certain circumstances, the subsidiaries will be paid a breakup fee by Lear. Consummation of the Agreement is conditioned upon a favorable vote of the Lear stockholders, regulatory filings and approvals and customary closing conditions.

The key clause to take out of this is the section mentioning that Lear will immediately commence a "go shop" period of 45 days where they will attempt to find a buyer who may offer better financial terms and conditions. While this is a positive for many investors, finding another bidder would still be a long shot. Carl Icahn's large existing stake in the company combined with the high failure rate of "go shop" periods greatly diminishes the liklihood of another bidder surfacing. Either way, this is definitely a stock to keep an eye on over the next couple of months as the company shops around for other potential bidders.

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