ArvinMeritor begins hostile takeover of rival Dana Corp.

| Thursday, July 10, 2003

ArvinMeritor Inc., Troy, MI, wants to own Dana Corp. and announced this week that in order to do that, it will try to acquire all outstanding shares of the Toledo, OH-based company.

Larry Yost, chairman and CEO of ArvinMeritor, wrote in a July 8 letter to the president and CEO of Dana Corp. that the ArvinMeritor board was surprised and disappointed when, in response to repeated efforts to effect a business combination of the two companies, Dana said it had "no interest whatsoever" in pursuing a transaction.

In June, Yost offered $14 a share but says the offer made it no further than the Dana Board of Directors. This week, Yost informed Dana’s CEO in the letter that he was prepared to go straight to the shareholders with an offer of $15 per share in cash.

ArvinMeritor's offer is 56 percent higher than Dana's stock price at the end of the day June 3, 2003, the last trading day before ArvinMeritor submitted its first proposal to Dana in writing. It is 39 percent higher than Dana's average closing stock price for the last 30 trading days, and 25 percent higher than Dana's stock price at the end of day July 7, 2003, the last trading day before the company’s announcement.

The proposed transaction has a total equity value of about $2.2 billion. Dana has $2.2 billion in other interests that bring the total enterprise value to about $4.4 billion. 

Yost stated, "We believe that to succeed in today's increasingly global and competitive automotive supplier industry, we must take actions that will increase the opportunities available to our company in the future and enhance value for our shareowners, customers and employees. 

“We would prefer to meet with the Dana board and its advisors to discuss our all-cash offer and negotiate a mutually acceptable transaction,” he said. “However, Dana has rejected our prior proposals and refused our requests to enter into discussions. Therefore, we believe it is necessary to take our offer directly to Dana's shareowners."

ArvinMeritor noted the offer would be conditioned upon, among other things, the removal of Dana's “poison pill,” acceptance by more than two-thirds of Dana's shares, receipt of necessary regulatory approvals, obtaining necessary financing and other customary conditions. 

A “poison pill” is a tactic designed to make a hostile corporate takeover too expensive to complete. It can involve a shareholder rights plan to prevent someone from buying more than a certain percentage of a company's stock without management approval, or a plan that would offer current stockholders bargain-priced shares if another company purchases a high percentage of the stock.

According to Yost, ArvinMeritor’s full terms and conditions will be contained in a formal Offer to Purchase that will be filed with the Securities and Exchange Commission and mailed to Dana's shareowners.

In a related action, ArvinMeritor filed a lawsuit against Dana and its Board of Directors in the Circuit Court for the City of Buena Vista, VA, asserting, among other things, that Dana's board breached its fiduciary duties to Dana's shareowners when it rejected ArvinMeritor's proposals without meeting with ArvinMeritor.

ArvinMeritor currently owns 1.1 million shares of Dana's common stock.

--by the Land Line staff

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