Announcement

Collapse
No announcement yet.

Billionaire Kerkorian raises stake in GM

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Billionaire Kerkorian raises stake in GM

    Billionaire Kerkorian raises stake in GM
    By Bernard Simon in Toronto

    FT
    June 8 2005 17:31

    Investors drove General Motors' shares higher on Wednesday after a
    tepid response to a tender offer launched by Kirk Kerkorian, the
    reclusive billionaire.

    Tracinda, Mr Kerkorian's investment company, disclosed that only 18.9m
    shares had been tendered at the offer price of $31, far fewer than the
    28m Mr Kerkorian had sought. Tracinda now owns 7.2 per cent of GM's
    stock, compared with a possible 8.9 per cent if the offer had been
    fully subscribed.

    The 88 year-old Mr Kerkorian, who made his name as a corporate raider
    in the casino and automotive sectors, has given no indication of his
    next move. Tracinda has until now insisted that it would be a passive
    investor, but few analysts have believed it.

    `I don't think he's ever made a passive investment in his life,' said
    David Healy, analyst at Burnham Securities.

    Ten years ago, Mr Kerkorian made an audacious attempt to buy Chrysler,
    the third-biggest US carmaker. The attempt failed, but he was left
    with a large block of shares that he sold at a hefty profit.

    `At this point, he's a minor nuisance to GM management,' MrHealy said.
    Himanshu Patel, analyst at JP Morgan, added `the fact that the tender
    offer was under-subscribed by a relatively large degree raises the
    prospect that Tracinda may raise its price'.

    Mr Kerkorian's offer of $31 was almost one-fifth above GM's share
    price when the offer was made in early May. The stock gained 5.2 per
    cent to $32.32 shortly before midday on Wednesday.

    Rick Wagoner, GM chief executive, unveiled a four-pronged strategy on
    Tuesday to revive the company's fortunes, including a new stable of
    cars and trucks, a revamped sales and marketing strategy for GM's
    eight brands, plant closures, and an attack on spiralling healthcare
    costs.

    But many analysts remain bearish citing, among other factors, the
    carmaker's continuing market share losses in North America, its heavy
    exposure to gas-guzzling sport-utility vehicles, and its high fixed
    costs.

    `The situation at GM is going to get a lot worse before it gets
    better,' Mr Healy said. Rob Hinchliffe, analyst at UBS Securities, is
    projecting a share price of $20. `GM needs a more aggressive plan to
    restructure the business,' Mr Hinchliffe said on Wednesday.

    The lukewarm response to Mr Kerkorian's offer suggests however that
    many investors share his view that the market has under-estimated GM's
    value.

    Describing the prospects for GM as `fairly balanced', Michael
    Bruynesteyn of Prudential Equity projected a further rise in the
    stock.

    Mr Bruynesteyn said he was swayed by the likelihood that GM would
    maintain its $2-a-share dividend. At the current share price, the
    dividend yield is about 6.5 per cent, a level matched by few other big
    US companies.
Working...
X