(Updates with ArvinMeritor comment on adviser role, para 10)
By Arindam Nag and Susan Kelly
NEW YORK/CHICAGO, July 29 (Reuters) - Auto parts maker ArvinMeritor said on Tuesday it had filed a lawsuit against Dana Corp. for "misrepresentations" in statements concerning its rejection of ArvinMeritor's $2.2 billion bid.
The suit, filed in a U.S. district court in Virginia on Friday, accused Dana of making statements and disclosures that are "materially misleading, fraudulent, deceptive or manipulative in violation" of Securities and Exchange Commission regulations.
ArvinMeritor announced on July 9 it was offering $15 in cash for each share in rival Dana, which rejected the deal, saying it undervalued the company and was "risky". The combination of the companies would create the third-largest U.S. auto parts maker.
A Dana spokesman said the company was aware of the suit and would respond shortly.
ArvinMeritor in the suit asks that Dana be ordered to correct alleged misstatements and be prevented from making future false statements or committing fraud.
ArvinMeritor criticized Dana for not making it clear why the company had set up a committee of independent directors to evaluate ArvinMeritor's offer.
"Dana's failure to disclose such a conflict, to explain that no conflict exists, or to otherwise explain why the independent committee was formed is a material omission," the suit said.
DEUTSCHE BANK RESIGNATION
Further details also emerged on Tuesday on the surprise resignation last week of Deutsche Bank as one of Dana's financial advisers.
ArvinMeritor, in its suit, said Deutsche earlier this year told ArvinMeritor it could buy Dana at a price of up to $15 per share. However, in last week's rejection, Dana said that Deutsche, along with Credit Suisse First Boston, had advised Dana that at $15 per share, the offer undervalued the company. It said Dana did not clarify this conflict of interest at Deutsche.
A Deutsche spokesman declined to comment but a source familiar with the situation said Deutsche had based its earlier valuation on public information.
Once Deutsch was hired by Dana to defend it against ArvinMeritor, it was able to access more information on the company's future prospects, the source said. However, Deutsche Bank quit its role as it did not want to get involved in any legal problems in case the hostile bid got more complicated, the source added.
Industry experts questioned what Dana's next move would be. The company has said it was looking at other alternatives but it has not been specific. The company has already undergone a rigorous restructuring and sold some non-core assets.
The Toledo, Ohio-based manufacturer has closed 28 plants, divested $600 million in non-core assets and cut its work force by almost 15 percent in the past two years.
Charles Brady, auto industry analyst with Credit Lyonnais Securities, said Dana management could either change course and decide to sit at the table with ArvinMeritor, accelerate its reorganization to include other asset sales, or look to make an acquisition of its own.
ArvinMeritor's shares closed eight cents higher in New York at $18.24 while Dana's shares ended 27 cents down at $15.18.