Hostile Bid for Dana Corporation

The automotive business continues to restructure in response to new cost and competitive pressures. The latest development is talk of a takeover of Dana Corporation in Toledo, OH by ArvinMentor.

The Dana Corporation, once the leading independent maker of automobile parts, has become the target of a $2.2 billion hostile takeover bid by a smaller rival, ArvinMeritor, after rebuffing acquisition discussions.

The move comes as auto parts companies remain vulnerable to the cost demands of the major automakers; outside suppliers account for some 70 percent of a vehicle's cost. ArvinMeritor's chief executive, Larry Yost, argued today that mergers were the only way left for suppliers to grow in a brutally competitive market.

"We've struggled to keep up with the changes," he said. "We've all restructured, but stand-alone restructuring isn't enough. The auto supply industry is dramatically different today and there's no going back."

ArvinMeritor is offering $15 a share in cash, a 25 percent premium over Dana's closing stock price on Monday. ArvinMeritor is also assuming $2 billion of debt. Shares of Dana surged 35 percent today, closing at $16.20. ArvinMeritor shares fell 3.4 percent, to $20.29.

News of the offer prompted speculation that Dana, whose shares traded in the $60's in the late 1990's, would fetch a much higher price and that other companies and even investment firms might enter the fray.

The outcome of this situation will have an economic development impact in the Toledo area, and perhaps other locations where Dana and ArvinMentor have operations. This is an important situation to watch. One hopes that Toledo will come out better than Cleveland did after the TRW takeover by Northrup Grumman.

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