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The Times, UK
June 9 2005
Spanner in works stops Kerkorian taking 9% stake in GM
By Elizabeth Judge
KIRK KERKORIAN, the US billionaire, failed in his audacious attempt
to secure a near 9 per cent stake in General Motors, taking nearly 10
million shares fewer than he had hoped for.
The 87-year-old investor offered last month to spend up to $868
million (£473 million) to buy as many as 28 million shares in the
ailing car group. He offered $31 for every GM share.
But his firm, Tracinda Corp, revealed yesterday that he failed to pry
loose enough shares from other investors. Only about 18.9 million
shares were offered, raising Mr Kerkorian's 3.9 per cent stake to 7.2
per cent. Shares in GM jumped 4.2 per cent on the news to close at
$32.02.
Mr Kerkorian, the majority owner of the MGM Mirage casino and hotel
operator, now owns 40.9 million shares in the embattled company.
Analysts said that Mr Kerkorian's offer, which is still expected to
make him GM's biggest individual investor, may have been hurt by his
bid buoying investor confidence in GM.
When the offer was announced on May 4, GM's shares surged more than
18 per cent to $32.80 on the New York Stock Exchange.
Analysts speculated that Tracinda may now raise its tender offer
price for GM shares because it was so largely undersubscribed.
Himanshu Patel, analyst at JP Morgan, said: `We view the tender offer
being undersubscribed as a useful gauge of sentiment towards GM
shares.'
But David Healy of Burnham Securities said that market forces simply
worked against Mr Kerkorian.
`It was undersubscribed because during most of the time that the
tender offer was in effect the market price of the stock was higher
than the tender offer,' he said.
`If you wanted to sell your GM stock you would receive more if you
sold it on the open market than if you tendered it to Kerkorian.'
Ten years ago, Mr Kerkorian, the son of Armenian émigrés, shook up
Chrysler Corp, another American icon, with an attempted hostile
takeover bid. He began building a stake in Chrysler in 1990 and
attempted to buy the whole company for $21 billion five years later.
Alhough he failed, because of insufficient finance, to buy the whole
company, he continued to exert pressure on the management and gave
his support to the merger between Chrysler and Daimler-Benz of
Germany.
Analysts believe that he may now put pressure on GM's management to
speed up the restructuring of the company. However they predict that
he will shy away from a full-blown takeover attempt.
Mr Kerkorian, who has bought and sold the MGM film studio three
times, has said that he will be a passive investor. He has said the
acquisition is `solely for investment purposes.'
Tracinda yesterday declined to comment on whether he was disappointed
with the reaction to his offer.
Although General Motors is still the world's biggest carmaker it has
been hit in recent years by Americans spurning local cars in favour
of cheaper Asian models.
In a bid to turn itself around GM is to cut 25,000 jobs by 2008 and
close a string of plants in North America.
The group hopes that the cuts, which have yet to be agreed by unions,
will reduce overheads by as much as $2.5 billion a year to help
reverse losses that, in the first three months of this year, reached
$1.1 billion.
June 9 2005
Spanner in works stops Kerkorian taking 9% stake in GM
By Elizabeth Judge
KIRK KERKORIAN, the US billionaire, failed in his audacious attempt
to secure a near 9 per cent stake in General Motors, taking nearly 10
million shares fewer than he had hoped for.
The 87-year-old investor offered last month to spend up to $868
million (£473 million) to buy as many as 28 million shares in the
ailing car group. He offered $31 for every GM share.
But his firm, Tracinda Corp, revealed yesterday that he failed to pry
loose enough shares from other investors. Only about 18.9 million
shares were offered, raising Mr Kerkorian's 3.9 per cent stake to 7.2
per cent. Shares in GM jumped 4.2 per cent on the news to close at
$32.02.
Mr Kerkorian, the majority owner of the MGM Mirage casino and hotel
operator, now owns 40.9 million shares in the embattled company.
Analysts said that Mr Kerkorian's offer, which is still expected to
make him GM's biggest individual investor, may have been hurt by his
bid buoying investor confidence in GM.
When the offer was announced on May 4, GM's shares surged more than
18 per cent to $32.80 on the New York Stock Exchange.
Analysts speculated that Tracinda may now raise its tender offer
price for GM shares because it was so largely undersubscribed.
Himanshu Patel, analyst at JP Morgan, said: `We view the tender offer
being undersubscribed as a useful gauge of sentiment towards GM
shares.'
But David Healy of Burnham Securities said that market forces simply
worked against Mr Kerkorian.
`It was undersubscribed because during most of the time that the
tender offer was in effect the market price of the stock was higher
than the tender offer,' he said.
`If you wanted to sell your GM stock you would receive more if you
sold it on the open market than if you tendered it to Kerkorian.'
Ten years ago, Mr Kerkorian, the son of Armenian émigrés, shook up
Chrysler Corp, another American icon, with an attempted hostile
takeover bid. He began building a stake in Chrysler in 1990 and
attempted to buy the whole company for $21 billion five years later.
Alhough he failed, because of insufficient finance, to buy the whole
company, he continued to exert pressure on the management and gave
his support to the merger between Chrysler and Daimler-Benz of
Germany.
Analysts believe that he may now put pressure on GM's management to
speed up the restructuring of the company. However they predict that
he will shy away from a full-blown takeover attempt.
Mr Kerkorian, who has bought and sold the MGM film studio three
times, has said that he will be a passive investor. He has said the
acquisition is `solely for investment purposes.'
Tracinda yesterday declined to comment on whether he was disappointed
with the reaction to his offer.
Although General Motors is still the world's biggest carmaker it has
been hit in recent years by Americans spurning local cars in favour
of cheaper Asian models.
In a bid to turn itself around GM is to cut 25,000 jobs by 2008 and
close a string of plants in North America.
The group hopes that the cuts, which have yet to be agreed by unions,
will reduce overheads by as much as $2.5 billion a year to help
reverse losses that, in the first three months of this year, reached
$1.1 billion.