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Kerkorian to reduce his stake in GM
He will sell a quarter of his 10% interest, a move that suggests he won't
try to take control of the automaker's board. Its stock tumbles 4.7%.
By John O'Dell
Times Staff Writer
November 23, 2006
Beverly Hills investor Kirk Kerkorian disclosed Wednesday that he was
selling a quarter of his nearly 10% stake in General Motors Corp.,
signaling to some analysts that he wouldn't pursue a fight to remake
the automaker's board.
The acknowledgment, contained in a regulatory filing by Kerkorian's
privately held investment company Tracinda Corp., spoiled Thanksgiving
formany GM investors as the automaker's shares fell to their lowest
point in more than a month.
In heavy trading Wednesday, GM shares declined $1.52, or 4.7%, to
$31.09- well below the $33 price at which Tracinda said its block
would change hands. The stock would have to drop below $30.24 for
Kerkorian to lose money on his investment.
"The news of Kerkorian lowering his position is what the market
apparently feared most," Merrill Lynch & Co. analyst John Murphy wrote
in a note to investors. "It now appears instead of becoming a more
aggressive activist,he may be allocating his capital to other
opportunities he believes have higher potential returns."
The sale of 14 million of Kerkorian's 56 million shares, scheduled to
close in a private transaction Friday, would bring a gross profit of
$38.6 million and free up about $423 million for other investments.
Tracinda also offered Wednesday to spend $825 million to acquire 15
million additional shares of MGM Mirage, which would boost its stake
in the Las Vegas gaming and hotel company to 61.7% from 56.3%. The
tender offer of $55 a share represents a 12% premium from MGM Mirage's
closing price Tuesday of $49. The stock rose $5.21, or 10.6%, on
Wednesday to $54.21.
Analysts said they did not believe that Tracinda's offer signaled a
bid to take MGM Mirage private. Tracinda said in a statement that the
plan to boost its investment "demonstrates our confidence in MGM
Mirage and its management and our commitment to the company's future."
The timing of the GM and MGM Mirage announcements may have been
coincidental.
This week marked the first time since Oct. 6 that Tracinda was able to
sell its GM stock because of a 45-day waiting period that kicked in
when Jerome York, a close Kerkorian associate, resigned as a GM
director.
The lifting of that prohibition had fueled speculation for several
days that Kerkorian would begin to reduce his GM holding.
In stepping down after just nine months on the board, York criticized
directors for not doing their own research and relying too heavily on
the automakers' executives. In particular, he and Kerkorian had been
pressing the board to join the current alliance of Nissan Motor
Co. and Renault as a dramatic move to boost GM's turnaround efforts.
Kerkorian had held a 9.9% interest in GM through Tracinda and will
still hold 42 million shares, equal to a 7.4% stake.
GM, which lost $10.6 billion last year and has posted a net loss of
$2.3 billion in the first three quarters this year, is in the midst of
an ambitious costcutting program as it tries to revitalize its North
American automotive operations after losing market share to foreign
brands for most of the last decade.
The company's stock had been gaining for much of this year as
investors and analysts saw signs of progress from the turnaround
plan. GM shares hit their 52-week closing high of $36.19 on Oct. 24.
Despite his decision to sell a big chunk of his GM holding, Kerkorian
will remain the automaker's third-largest investor.
A spokeswoman for Tracinda said neither the company nor Kerkorian
would comment on the GM stock sale.
"It's Kerkorian's style," said industry analyst David Healy of Burnham
Securities. "He should either fish or cut bait, but instead he buys a
little, sells a little and constantly stirs things up."
There has been speculation since York resigned as a GM director last
month that Kerkorian may attempt to launch a proxy battle to take
control of the automaker's board at next year's annual meeting.
But many analysts doubted that strategy, and Healy, who owns GM stock,
said Wednesday that Kerkorian's sell-off seemed to show "that he
doesn't have the support he'd need for a proxy fight" to win
shareholder votes to elect his own slate of directors and oust GM's
chairman and chief executive, Rick Wagoner.
Wagoner's turnaround plan calls for GM to close 14 North American
plants and slash its manufacturing payrolls in the U.S. and Canada by
about 35,000 jobs in the next few years. GM also has negotiated with
its labor unions for substantial savings on future medical costs.
Wagoner says the moves will save GM $9 billion a year.
Kerkorian's stock sale may indicate that "he doesn't think there will
be a blip in Rick Wagoner's plan - showing he can't create the
controversy he needs to change the board's direction," automotive
analyst Kevin Reale of AMR Research told Reuters on Wednesday.
Kerkorian began building his 9.9% GM holding in 2005, ultimately
investing $1.68 billion in the company. He sold a block of shares at
the end of 2005for tax purposes but reacquired them in 2006; early
this fall Kerkorian said he might purchase an additional 12 million
shares to push his stake to just above 10%.
He dropped those plans when talks about a possible alliance of GM,
Nissan and Renault fell apart in early October.
Kerkorian and York had been the principal architects of the talks,
which dissolved when GM said Nissan and Renault would benefit most
from a three-way tie-up and should pay GM a multibillion-dollar
premium to move forward with the plan. York resigned from GM's board
the day after the talks ended.
Separately Wednesday, GM announced that as part of its North American
restructuring it would cease manufacturing conventional minivans this
decade and concentrate instead on new types of crossovers: vehicles
that are built on passenger-car platforms but feature sporty wagon or
sport-utility styling and roominess.
*
[email protected]
Kerkorian to reduce his stake in GM
He will sell a quarter of his 10% interest, a move that suggests he won't
try to take control of the automaker's board. Its stock tumbles 4.7%.
By John O'Dell
Times Staff Writer
November 23, 2006
Beverly Hills investor Kirk Kerkorian disclosed Wednesday that he was
selling a quarter of his nearly 10% stake in General Motors Corp.,
signaling to some analysts that he wouldn't pursue a fight to remake
the automaker's board.
The acknowledgment, contained in a regulatory filing by Kerkorian's
privately held investment company Tracinda Corp., spoiled Thanksgiving
formany GM investors as the automaker's shares fell to their lowest
point in more than a month.
In heavy trading Wednesday, GM shares declined $1.52, or 4.7%, to
$31.09- well below the $33 price at which Tracinda said its block
would change hands. The stock would have to drop below $30.24 for
Kerkorian to lose money on his investment.
"The news of Kerkorian lowering his position is what the market
apparently feared most," Merrill Lynch & Co. analyst John Murphy wrote
in a note to investors. "It now appears instead of becoming a more
aggressive activist,he may be allocating his capital to other
opportunities he believes have higher potential returns."
The sale of 14 million of Kerkorian's 56 million shares, scheduled to
close in a private transaction Friday, would bring a gross profit of
$38.6 million and free up about $423 million for other investments.
Tracinda also offered Wednesday to spend $825 million to acquire 15
million additional shares of MGM Mirage, which would boost its stake
in the Las Vegas gaming and hotel company to 61.7% from 56.3%. The
tender offer of $55 a share represents a 12% premium from MGM Mirage's
closing price Tuesday of $49. The stock rose $5.21, or 10.6%, on
Wednesday to $54.21.
Analysts said they did not believe that Tracinda's offer signaled a
bid to take MGM Mirage private. Tracinda said in a statement that the
plan to boost its investment "demonstrates our confidence in MGM
Mirage and its management and our commitment to the company's future."
The timing of the GM and MGM Mirage announcements may have been
coincidental.
This week marked the first time since Oct. 6 that Tracinda was able to
sell its GM stock because of a 45-day waiting period that kicked in
when Jerome York, a close Kerkorian associate, resigned as a GM
director.
The lifting of that prohibition had fueled speculation for several
days that Kerkorian would begin to reduce his GM holding.
In stepping down after just nine months on the board, York criticized
directors for not doing their own research and relying too heavily on
the automakers' executives. In particular, he and Kerkorian had been
pressing the board to join the current alliance of Nissan Motor
Co. and Renault as a dramatic move to boost GM's turnaround efforts.
Kerkorian had held a 9.9% interest in GM through Tracinda and will
still hold 42 million shares, equal to a 7.4% stake.
GM, which lost $10.6 billion last year and has posted a net loss of
$2.3 billion in the first three quarters this year, is in the midst of
an ambitious costcutting program as it tries to revitalize its North
American automotive operations after losing market share to foreign
brands for most of the last decade.
The company's stock had been gaining for much of this year as
investors and analysts saw signs of progress from the turnaround
plan. GM shares hit their 52-week closing high of $36.19 on Oct. 24.
Despite his decision to sell a big chunk of his GM holding, Kerkorian
will remain the automaker's third-largest investor.
A spokeswoman for Tracinda said neither the company nor Kerkorian
would comment on the GM stock sale.
"It's Kerkorian's style," said industry analyst David Healy of Burnham
Securities. "He should either fish or cut bait, but instead he buys a
little, sells a little and constantly stirs things up."
There has been speculation since York resigned as a GM director last
month that Kerkorian may attempt to launch a proxy battle to take
control of the automaker's board at next year's annual meeting.
But many analysts doubted that strategy, and Healy, who owns GM stock,
said Wednesday that Kerkorian's sell-off seemed to show "that he
doesn't have the support he'd need for a proxy fight" to win
shareholder votes to elect his own slate of directors and oust GM's
chairman and chief executive, Rick Wagoner.
Wagoner's turnaround plan calls for GM to close 14 North American
plants and slash its manufacturing payrolls in the U.S. and Canada by
about 35,000 jobs in the next few years. GM also has negotiated with
its labor unions for substantial savings on future medical costs.
Wagoner says the moves will save GM $9 billion a year.
Kerkorian's stock sale may indicate that "he doesn't think there will
be a blip in Rick Wagoner's plan - showing he can't create the
controversy he needs to change the board's direction," automotive
analyst Kevin Reale of AMR Research told Reuters on Wednesday.
Kerkorian began building his 9.9% GM holding in 2005, ultimately
investing $1.68 billion in the company. He sold a block of shares at
the end of 2005for tax purposes but reacquired them in 2006; early
this fall Kerkorian said he might purchase an additional 12 million
shares to push his stake to just above 10%.
He dropped those plans when talks about a possible alliance of GM,
Nissan and Renault fell apart in early October.
Kerkorian and York had been the principal architects of the talks,
which dissolved when GM said Nissan and Renault would benefit most
from a three-way tie-up and should pay GM a multibillion-dollar
premium to move forward with the plan. York resigned from GM's board
the day after the talks ended.
Separately Wednesday, GM announced that as part of its North American
restructuring it would cease manufacturing conventional minivans this
decade and concentrate instead on new types of crossovers: vehicles
that are built on passenger-car platforms but feature sporty wagon or
sport-utility styling and roominess.
*
[email protected]