Billionaire Kerkorian makes surprise play for GM shares

Agence France Presse
May 4 2005

NEW YORK (AFP) – Corporate takeover specialist Kirk Kerkorian stunned
financial markets, announcing plans to boost his stake in General
Motors, sending the ailing automaker’s shares skyward and leaving
analysts puzzled.

The offer from Kerkorian’s Tracinda Corp., known for its buyout
efforts, is for 28 million shares at 31 dollars a share, or about
868 million dollars.

The 87-year-old Kerkorian, who has bought and sold MGM studios and
was once Chrysler Corp.’s largest shareholder, could end up with
nearly nine percent of GM as a result.

The offer price is 13 percent above GM’s closing price of 27.77 dollars
on Tuesday, without regard to General Motors’ regular quarterly
dividend of 50 cents per share expected to be paid in June 2005,
Tracinda said.

GM shares surged some 18 percent to close at 32.80 on the news.

Tracinda currently owns 22 million shares of General Motors common
stock, which represents approximately 3.89 percent of the outstanding
shares, according to the holding company.

A statement from Tracinda said the move is “solely for investment
purposes,” but that it made the announcement public “to remove any
uncertainty in the marketplace as to its investment intent.”

Analysts said the move appeared to be a vote of confidence in the
world’s biggest automaker, which has been in a turmoil over eroding
market share in the US and growing financial uncertainties.

But it may also signal some effort to influence GM’s board or
management.

Joseph Amaturo, analyst at Calyon Securities, said the buy could
ultimately prove to be more than a passive investment.

He told clients in a note that the stake “will give Kerkorian a
‘license’ to put pressure on management and/or the UAW at some point
down the road … Tracinda could be the catalyst needed to drum up
major structural changes at GM as well as in the entire automotive
industry.”

The move “is an indication that auto shares are at their lows,
statistically very cheap,” said David Healy at Burnham Securities.

“Obviously he wants to make money but possibly he could intend as
well to mess with the management, that’s his history.”

Analyst Rebecca Lindland at the research firm Global Insight, called
the move “an interesting strategy” but that Kerkorian’s intentions
were not clear.

Lindland said it is possible that Kerkorian may be able to help GM
wring concessions out of the United Auto Workers union to help
the automaker’s financial picture.

“I don’t know what his long-term strategy is here,” Lindland said.
“This could have a beneficial influence on the union. If GM were able
to get the union under control while simultaneously getting exciting
products out, they could be on the road to recovery.”

Kerkorian, who with estimated assets of 8.9 billion dollars is listed
as the 41st richest person by Forbes magazine, has a long history in
takeover efforts. He bought and sold MGM studios three times and has
been a major investor in Las Vegas casinos.

The son of Armenian immigrants, he bought about 80 acres (32 hectares)
of land in the Nevada desert, for less than one million dollars in
1962 and helped to make Las Vegas a worldwide name. He remains an
active investor in the casino industry.

The news comes just weeks after Kerkorian suffered a legal defeat in
his billion dollar lawsuit over Daimler-Benz’s takeover of Chrysler,
which alleged the German firm misled investors.