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Kerkorian roars back into autoland
By Jim Jelter
Investor's Business Daily
May 4 2005
Last Updated: 5/4/2005 3:59:02 PM
SAN FRANCISCO (MarketWatch) - Billionaire investor Kirk Kerkorian,
by going after a bigger stake in sputtering General Motors Corp.,
has put his billions back in gear after his big DaimlerChrysler
lawsuit backfired.
Kerkorian held 22 million shares, or 3.9%, in General Motors (GM)
before announcing Wednesday he plans to more than double the stake to
50 million shares and is willing to pay up to $31 a share to get there.
The news triggered a 17% rally in GM's share price, adding a cool
$95 million to Kerkorian's holdings before he bought a single share.
This whopping one-day gain goes a long way toward soothing some of
the sting from his failed legal tussle with DaimlerChrysler AG (DCX).
Kerkorian, through his Beverly Hills-based Tracinda Corp., took
DaimlerChrysler to court in 2000, seeking $3 billion in damages.
The lawsuit claimed Daimler-Benz management defrauded Chrysler
shareholders by tricking them into thinking the 1998 deal was a merger
of equals to avoid paying a premium for Chrysler shares.
This was especially galling to Kerkorian, who owned 13.75% of
Chrysler. The steady decline of DaimlerChrysler shares, from over
$108 in early 1999 to just under $30 in late 2001, didn't make the
deal any easier to swallow.
Kerkorian argued the $36 billion merger was, in fact, a takeover that
put control of the company in German hands, reducing Chrysler to a
division of Stuttgart-based Mercedes Benz.
Last month, he lost the case. See full story.
Kerkorian, already a big wheel in Las Vegas through Tracinda's
controlling stake in casino and hotel operator MGM Mirage (MGM), has
a history of betting big money on the auto industry, having attempted
a takeover of Chrysler back in 1995.
Prior to his fascination with the auto industry, the 87-year-old,
Fresno-born son of Armenian immigrants, made his fortune developing
some of the most famous properties on the Las Vegas strip, which he
parlayed at one point into ownership of Hollywood's Metro-Goldwyn-Meyer
studios.
While Kerkorian has a reputation for using his holdings to badger the
management of poor-performing companies, he insists his heightened
interest in GM is that of an investor, not a corporate raider.
But analysts aren't convinced the old lion is willing to buy and hold
GM stock and wait for a turnaround.
Rather, most see him as a catalyst that can help revive the lumbering
carmaker and tackle some of its tougher problems, like spiraling
health-care costs, a deeply entrenched union, and lackluster product
line.
"He'll put pressure on management to do the right thing for
shareholders," said David Giroux, an analyst at Baltimore-based T.
Rowe Price Group Inc., which owns GM shares in various mutual funds.
Judging from the rally in GM's share price, the market clearly expects
Kerkorian's latest junket to bring better times to Detroit.
By Jim Jelter
Investor's Business Daily
May 4 2005
Last Updated: 5/4/2005 3:59:02 PM
SAN FRANCISCO (MarketWatch) - Billionaire investor Kirk Kerkorian,
by going after a bigger stake in sputtering General Motors Corp.,
has put his billions back in gear after his big DaimlerChrysler
lawsuit backfired.
Kerkorian held 22 million shares, or 3.9%, in General Motors (GM)
before announcing Wednesday he plans to more than double the stake to
50 million shares and is willing to pay up to $31 a share to get there.
The news triggered a 17% rally in GM's share price, adding a cool
$95 million to Kerkorian's holdings before he bought a single share.
This whopping one-day gain goes a long way toward soothing some of
the sting from his failed legal tussle with DaimlerChrysler AG (DCX).
Kerkorian, through his Beverly Hills-based Tracinda Corp., took
DaimlerChrysler to court in 2000, seeking $3 billion in damages.
The lawsuit claimed Daimler-Benz management defrauded Chrysler
shareholders by tricking them into thinking the 1998 deal was a merger
of equals to avoid paying a premium for Chrysler shares.
This was especially galling to Kerkorian, who owned 13.75% of
Chrysler. The steady decline of DaimlerChrysler shares, from over
$108 in early 1999 to just under $30 in late 2001, didn't make the
deal any easier to swallow.
Kerkorian argued the $36 billion merger was, in fact, a takeover that
put control of the company in German hands, reducing Chrysler to a
division of Stuttgart-based Mercedes Benz.
Last month, he lost the case. See full story.
Kerkorian, already a big wheel in Las Vegas through Tracinda's
controlling stake in casino and hotel operator MGM Mirage (MGM), has
a history of betting big money on the auto industry, having attempted
a takeover of Chrysler back in 1995.
Prior to his fascination with the auto industry, the 87-year-old,
Fresno-born son of Armenian immigrants, made his fortune developing
some of the most famous properties on the Las Vegas strip, which he
parlayed at one point into ownership of Hollywood's Metro-Goldwyn-Meyer
studios.
While Kerkorian has a reputation for using his holdings to badger the
management of poor-performing companies, he insists his heightened
interest in GM is that of an investor, not a corporate raider.
But analysts aren't convinced the old lion is willing to buy and hold
GM stock and wait for a turnaround.
Rather, most see him as a catalyst that can help revive the lumbering
carmaker and tackle some of its tougher problems, like spiraling
health-care costs, a deeply entrenched union, and lackluster product
line.
"He'll put pressure on management to do the right thing for
shareholders," said David Giroux, an analyst at Baltimore-based T.
Rowe Price Group Inc., which owns GM shares in various mutual funds.
Judging from the rally in GM's share price, the market clearly expects
Kerkorian's latest junket to bring better times to Detroit.