ArvinMeritor investors mostly cheered news that the long drama of the automotive parts maker's aggressive bid to take over rival Dana Corporation ended in failure on Sunday, Reuters reported.

The report said the outcome was greeted with a sigh of relief after worries that ArvinMeritor would hobble its balance sheet and cash flow to handle such an acquisition. The company's shares gained 4% after soaring up as much as 6%, Reuters added.

The news agency noted that, after a handful of back-and-forth lawsuits in the hostile bid from ArvinMeritor, an increased bid of $US18 a share, or $2.7 billion, was unanimously rejected by the board, the latest and apparently final rebuff of the all-cash offer.

Reuters said bondholders and credit investors took a step back, even with the recent rally in spreads, adding that one question left unanswered was how quickly axles, brake, exhaust and suspension systems maker ArvinMeritor will find another target.

Some credit default swap traders told the news agency that ArvinMeritor is likely to cool its acquisition-hungry stance for the time being, even though chief executive Larry Yost said in a statement on Sunday that the company felt consolidation in the automotive parts industry is "necessary and inevitable."

"We will pursue an organic growth strategy while examining opportunities for consolidation that enhance value for our shareowners," Yost reportedly said.

Reuters said that would mean the potential damage to ArvinMeritor's balance sheet is not over, and its credit profile could take a hit as it tries to reposition amid industry overcapacity and vehicle makers' attempts to cut costs and work with fewer suppliers.

Reuters said that credit ratings agencies have either cut ArvinMeritor's ratings, now at junk levels, or have threatened to do so if it carries out an acquisition and, even after ArvonMeritor ended its bid for Dana, Standard & Poor's repeated that its ratings, as well as those of Dana, were on watch for a cut. Reuters cited S&P as saying that both companies' ratings will depend on how they succeed in paring debt burdens as well as the industry outlook - S&P currently rates ArvinMeritor BB-plus and Dana BB.

Reuters said that some analysts think ArvinMeritor is in a better position to do well heading into 2004 with its emphasis on the heavy truck market, which is seen as benefiting more from the economy's rebound than sales of light vehicles.

"ArvinMeritor is proportionately greater in its exposure to trucks, so it will now be a more pronounced beneficiary there as well. That, if anything, is a good reason for both ArvinMeritor shareholders and more obviously bondholders to be relieved," CreditSights analyst Glenn Reynolds wrote, according to Reuters.

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