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Published: Monday, 11/24/2003

Dana fends off hostile takeover attempt

BY JULIE M. McKINNON
BLADE BUSINESS WRITER

ArvinMeritor Inc. yesterday terminated its final $18-a-share tender offer to Dana Corp. shareholders, ending a tumultuous 4 1/2-month siege of the Toledo auto supplies giant by its smaller competitor.

The Troy, Mich., company announced it was ceasing the hostile takeover bid and returning tendered shares a little more than an hour after Dana's board publicly revealed a unanimous rejection of ArvinMeritor's latest offer yesterday.

ArvinMeritor last week said its $18-a-share deal, up from $15 a share initially offered to investors in July, would be the last unless Dana's board agreed by Dec. 2 to negotiate a deal.

“We are pleased that this distraction is now apparently behind us and that we can focus intensely on our business and enhancing value for our shareholders,” said Michelle Hards, director of investor relations for $10.3 billion Dana.

Experts were not surprised by the demise of the takeover bid, which some said was doomed from the start in part because ArvinMeritor hadn't secured financing for the deal.

Some analysts had estimated ArvinMeritor would have to offer around $20 a share, possibly through a combination of cash and stock, to entice shareholders of Toledo's largest firm, which employs 60,000 people worldwide and 1,850 in northwest Ohio and southeast Michigan.

“It's just too bad that Joe Mag isn't around to see this,” said industry expert David Cole. Dr. Cole was referring to Joe Magliochetti, Dana's late chairman and chief executive. The 61-year-old died suddenly in September of complications from inflammation of the pancreas, or pancreatitis.

Led by the retired head of Toledo's Owens Corning, Glen Hiner, Dana board members told shareholders the final offer was not in their best interests or those of the company.

According to its letter to shareholders, the board said there were risks and uncertainties in ArvinMeritor's ability to get financing, and the Federal Trade Commission likely would have a negative view toward the company's proposal to divest Dana's massively overlapping product lines.

ArvinMeritor spokesman Lin Cummins said yesterday that neither financing nor regulatory approval would have been problems.

ArvinMeritor had indicated from the start that it was in for the long haul and threatened to try next year to elect members to Dana's board who would favor the takeover.

But the company decided it was in the best interest of its shareholders to issue a final deadline, Ms. Cummins said. ArvinMeritor remains interested in a deal with Dana but will not pursue a hostile stance, she said. “If they want to sit down and talk with us, of course we will,” Ms. Cummins said.

Larry Yost, ArvinMeritor's chairman and chief executive, said in a statement: “Our primary responsibility is to ArvinMeritor's shareowners, and we do not believe it is in their best interests to continue expending valuable corporate resources for an indeterminate period of time.”

ArvinMeritor went public with its hostile takeover intentions on July 8 and started the $15-a-share tender offer a day later. The firm, which had $7.8 billion in sales last fiscal year and is on a quest to more than double that amount, had been rebuffed by Dana officials for a month beforehand.

The Michigan company had continued to lose what little support it had from Dana investors as it extended the $15-a-share tender offer. More than 2.5 million Dana shares were tendered in late August, or less than 2 percent of outstanding stock, while little more than 1 million were in ArvinMeritor's hands as of Nov. 14.

Dana's stock price, meanwhile, has remained near or above $15 and dropped from more than $16 a share after ArvinMeritor increased its offer last week, an indication investors believed the deal would die. It closed Friday at $15 a share on the New York Stock Exchange, up 2 cents.

Wall Street obviously agreed with Dana officials in thinking that ArvinMeritor's offer was inadequate, auto analyst Joe Phillippi, president of AutoTrends Consulting in Short Hills, N.J., said yesterday.

Shareholders were starting to see results from Dana's restructuring efforts, said Dr. Cole, chairman of the Center for Automotive Research in Ann Arbor. Dana raised its dividend from a penny to 6 cents in October and reported third-quarter profit of $61 million, or 41 cents a share, an increase from $4 million, or 2 cents a share, in the same period last year.

While Dana will not have ArvinMeritor's hostile takeover bid looming as it enters its centennial year, it was unclear yesterday what will happen to the two companies' legal battles.

ArvinMeritor's Ms. Cummins said she was unable to comment on what will happen to lawsuits ArvinMeritor has filed against Dana in an effort to have the company's anti-takeover measures removed.

Ms. Hards of Dana declined to comment on legal disputes with ArvinMeritor, including a lawsuit filed in Lucas County Common Pleas Court accusing the rival of illegally using confidential material.



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