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Kirk Kerkorian: Wizard investor's shadow looms over GM board

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  • Kirk Kerkorian: Wizard investor's shadow looms over GM board

    Detroit Free Press, MI
    June 30 2006

    Archives: Kirk Kerkorian: Wizard investor's shadow looms over GM

    June 30, 2006

    Originally published Thursday, May 05, 2005


    Kirk Kerkorian has been hurling lightning bolts at Detroit for 15
    years now.

    Like an angry wizard in a hidden fortress, the reclusive Kerkorian
    has roiled two of Motown's major industries - auto manufacturing and
    casino gaming - and changed the city's landscape with the creation of
    MGM Grand Detroit.

    He may have cast his most thunderous bolt Wednesday, announcing that
    he wants to up his stake in General Motors Corp. to nearly 9 percent.
    Although the increased stake was described as for investment purposes
    only, rather than a bid for active control of the world's biggest
    automaker, Detroiters singed by the wizard's wrath take nothing for

    After all, when he first bought a chunk of then-Chrysler Corp. in
    1990, he also said he was only a passive investor, but later launched
    a bitter takeover fight.

    "He certainly strikes terror in the boardrooms of major
    corporations," said Oakland County Executive L. Brooks Patterson.

    But many Detroiters applauded the announcement, saying Kerkorian has
    magic in his eyes when it comes to spotting value in a company.

    "You look at it twofold," David Sowerby, portfolio manager at the
    Bloomfield Hills office of Loomis Sayles & Co., said Wednesday. "To
    the extent that he has a proven track record and is looking for
    deeper value opportunities, then I think that's a resounding positive
    signal that he sees potential where many investors are skeptical on
    General Motors.

    "The second issue then becomes more of a home-turf, let's call it
    Fortress Michigan, perspective," Sowerby added. "Does he come in and
    potentially upset the apple cart? That second issue is too soon to
    tell, with respect to retirees, health care, pension costs, labor

    Lansing-based economist Patrick Anderson also viewed Kerkorian's
    interest in GM as mostly positive.

    "I view that as a savvy investor saying that the world is not valuing
    this crown jewel of American industrial might as it should," Anderson
    said. "I don't think it's any nostalgia for Detroit iron or a desire
    to move to Woodward Avenue. He expects to make some money."

    That Kerkorian even resembles a Merlin-like character only adds to
    his mystique. Now 87 years old, his power lies in his fantastic
    wealth - $8.9 billion, according to Forbes magazine's 2004 list of
    the 400 wealthiest Americans.

    No doubt the debate on Kerkorian's impact on Detroit will continue
    for years.

    A wizard of a deal-maker

    A decade ago, then-Chrysler Chairman and Chief Executive Officer
    Robert Eaton blistered Kerkorian as a corporate raider out to savage
    a healthy company after Kerkorian launched a takeover bid. Yet others
    noted that Chrysler's stock price more than doubled between the time
    he first started buying the shares in 1990 until the time he backed
    off his takeover attempt five years later.

    Moreover, although many Detroiters opposed the opening of casinos in
    the city for many years, Kerkorian's MGM Grand in Detroit has pumped
    millions of dollars into municipal coffers. Now that a court ruling
    has cleared the way for bigger permanent casinos in the city, MGM
    Grand's proposed site on the west side of downtown promises to
    substantially change the city's skyline.

    About all that's certain is this: For a man whom few, if any,
    Detroiters have ever laid eyes on, Kerkorian has shaken up the Motor
    City like few before him.

    The son of Armenian immigrants who ran a produce business in Fresno,
    Calif., Kerkorian quit school as a teenager to go to work. He spent a
    year in the Depression-era Civilian Conservation Corps, served as a
    military pilot during World War II, and after the war ran a small
    air-charter service to ferry gamblers between Los Angeles and Las

    Kerkorian paid $60,000 for the charter service in 1947, when he was
    30. In 1968, he sold it to Trans-america Corp. for a little over $100
    million. It was his first fortune, and a banker friend, Walter Sharp,
    said much later the transaction transformed Kerkorian.

    "Kirk realized then that everything was in the timing," Sharp said in
    1995. "He became fascinated with the idea of making deals."

    And deals there were. For a man so intensely private, he showed a
    remarkable taste for splashy investments, mostly in Las Vegas. With
    the proceeds of his airline sale, he acquired the Flamingo hotel
    there in 1967. It was just the first of several casino-hotels
    Kerkorian would buy, sell or build in the decades since.

    Last June, he was behind a $7.9-billion takeover of Mandalay Bay
    Resorts. That, in turn, forced the sale under Michigan gaming laws of
    Mandalay Bay's MotorCity Casino in Detroit. By accepting a bid from
    pizza and sports entrepreneur Marian Ilitch, Kerkorian dramatically
    shuffled the cast of players in Detroit's casino industry.

    Movies also have held a lure. Kerkorian bought the MGM film studio
    three times between 1970 and 1996, once selling it to mogul Ted
    Turner and buying it back again in a matter of months.

    Although nowhere near as reclusive as the legendary Howard Hughes,
    Kerkorian nonetheless runs a low-key operation. Angered by a
    reporter's questions years ago, Kerkorian rarely, if ever, gives
    interviews. Shy and unpretentious, he has been known to stand in line
    even for movies his own studio produced rather than ask for private

    His Las Vegas-based company, Tracinda Corp., is named for two
    daughters, Tracy and Linda. His personal life has had a tabloid
    flavor: Kerkorian has been married three times, including a 1999
    union with tennis pro Lisa Bonder that lasted one month before
    divorce papers were filed.

    Peter Bart, a former MGM executive who wrote a book about Kerkorian
    years ago, once told the Free Press that the billionaire's interests
    didn't go toward day-to-day operational issues at the companies he

    "If his performance were the same at Chrysler as it was at MGM,
    expect him to take no interest in the car industry, to rarely show up
    for anything and to never second-guess next year's new models," Bart,
    author of "Fade Out: The Calamitous Final Days at MGM," told the Free
    Press in 1990.

    "He's about as far from Lee Iacocca as you can get," Bart added at
    that time. "He admits he's never been a good judge of character, and
    it inhibits his ability to build a good management team."
    Will lightning strike again?

    Ironically, it was a meeting with Iacocca that sparked Kerkorian's
    interest in Detroit. Meeting the then-automotive executive at a
    Florida racetrack, Kerkorian agreed in 1990 to invest in Chrysler,
    whose finances were shaky again because of slumping sales.

    Five years later, his stance as a passive investor gave way to a
    takeover bid when the company didn't perform as he'd hoped. Among
    other moves, he got former Kmart executive Joseph Antonini to resign
    from Chrysler's board so his own candidate could take his place. At
    the height of the controversy, Kerkorian was demanding three seats on
    the board, a prohibition on issuing new stock that would dilute
    shareholders' voting rights and the right to buy more Chrysler stock
    without penalty.

    That bid ended when Kerkorian couldn't stitch together a workable
    deal. Later, he was an early and avid supporter of the deal that saw
    Daimler-Benz AG merge with Chrysler in 1998.

    But pleasure turned to anger once again when Kerkorian came to
    believe that the merger was really an ill-disguised takeover that
    devalued his shares. He sued DaimlerChrysler in a bitter and
    protracted legal battle.

    Although a judge in April rejected Kerkorian's claims, the investor
    at least had the satisfaction of forcing Daimler boss Juergen
    Schrempp to testify in open court about embarrassing statements he
    had made calling the deal a "merger" only to soothe American feelings
    about a takeover.

    From: Emil Lazarian | Ararat NewsPress