Kerkorian plays automotive roulette one more time

Reuters
05/04/05 19:21 ET

DETROIT (Reuters) – It has been about a decade since Las Vegas
casino mogul Kirk Kerkorian launched an unsuccessful bid to take over
Chrysler, but he doesn’t seem to have lost his passion for high-stakes
gambling and rolls of the automotive roulette wheel.

The 87-year-old dealmaker’s Tracinda Corp. announced on Wednesday
that he was offering up to $868 million to buy as many as 28 million
shares in financially troubled General Motors Corp.

The news sent shares in the world’s largest automaker up more than
18 percent, meaning Kerkorian single-handedly triggered a gain of
more than $110 million in the value of the 22 million GM shares he
disclosed he already owns.

A source close to Tracinda said the 22 million shares were bought by
Kerkorian over the last three or four weeks.

It seems unlikely that Kerkorian was out to make a quick buck in
announcing his tender offer, however, even if it came after GM’s
shares had slumped to their lowest level in more than a decade.

His move drove U.S. stocks broadly higher. And financial analysts
said Kerkorian, who has positioned himself to raise his stake in GM
to nearly 9 percent, appears to have more grandiose plans for the
automaker than short-term profits.

That was certainly the case when he was an “active” investor at
Chrysler and tried to gain control of GM’s crosstown rival in the
1990s.

“We think Kerkorian’s move could have potentially broad-reaching
implications,” JPMorgan analyst Himanshu Patel said in a note to
investors.

“Forcing a sale of the GMAC business could potentially unlock
significant value,” Patel said, referring to the finance arm of GM
that has served as a safety net as the automaker struggles to turn
its automotive operations back to profit.

Kerkorian’s lawyer, Terry Christensen, told Reuters in an interview
late on Wednesday that he has no intention of trying to win control
over GM by building up an equity stake in the company.

“This is just a passive investment,” said Christensen, who has known
Kerkorian for about 30 years. He stressed, though, that Kerkorian has
“a tremendous instinct for assets” and was a big believer in building
shareholder value.

“One of the things that he’s always done through the years, whether
he was an investor in a company or controlled the company, he always
had in mind the shareholders sharing the same benefits that he had,”
Christensen said.

Kerkorian, the California-born son of Armenian immigrants, dropped
out of school at a young age and is notoriously reclusive. A onetime
prizefighter with the nickname “Rifle Right,” he was Chrysler’s
biggest shareholder when he and former auto boss Lee Iaccoca tried
to take it over in 1996.

A perennial fixture on Forbes’ list of richest Americans, Kerkorian
has an estimated net worth of $8.9 billion.

MAN WITH A PLAN

“I think he’s a smart son-of-a-bitch,” said a senior official at
DaimlerChrysler’s Chrysler division, when asked about Kerkorian’s
possible plans for the world’s largest automaker.

“He doesn’t do things frivolously. He has a plan.”

It was DaimlerChrysler that used the term “frivolous” to dismiss
the $1 billion lawsuit Kerkorian filed over the 1998 linkup between
Germany’s Daimler-Benz and Chrysler.

But Kerkorian, the biggest casino boss in Las Vegas history,
is known for keeping abreast of every investment he makes and
thinking through all his moves very carefully. He is not someone
to be underestimated, even in his appeal of the court ruling that
dismissed his DaimlerChrysler lawsuit.

As a developer, he has built some of the world’s largest hotels on
the Vegas strip, and as a majority owner of casino and hotel operator
MGM Mirage Inc., he has built up a sprawling real estate empire. He
presides over 11 casino resorts on the Vegas Strip alone and has made
some of the biggest deals in the history of the gaming industry.

With the recently completed sale of Metro-Goldwyn-Mayer Inc. to an
investment group led by Sony Corp., Kerkorian will also go down in
the annals of business as the man who sold the venerable film studio,
not once, but three times.