News of Kerkorian Raising GM Investment Sends Stock Soaring

Kirk Kerkorian, who shook up Chrysler Corporation with a hostile takeover bid a decade ago, disclosed he is building an 8.8% stake in General Motors Corporation, sending GM shares to their biggest gain in more than 40 years.Mr. Kerkorian’s Tracinda Corporation yesterday said it holds 22 million shares of GM and will buy 28 million more at $31 each.Mr. Kerkorian, who is buying the stock after a 42% decline in the past year, is making a “strictly passive” investment in GM, his attorney, Terry Christensen, said.“He’s going to put their feet to the fire like he did Chrysler,” said John Kornitzer, who manages $5.5 billion at Kornitzer Capital Management in Shawnee Mission, Kan., including GM shares. “They’ll get more lean and efficient. They’ll get tougher on the unions. It’s good.”Mr. Kerkorian, 87, may push for changes at the world’s biggest automaker after its American market share fell to an 80-year low and it reported a $1.1 billion first-quarter loss. The chief executive, Rick Wagoner, must now contend with the specter of an activist Mr. Kerkorian while trying to rebuild sales, develop better vehicles, and wrest health-care concessions from American workers.After Mr. Kerkorian bought shares in Chrysler starting in 1990, he pressured the automaker to increase its dividend, buy back shares, and add a Tracinda employee to the automaker’s board. He said at the time that the purchases were for investment purposes.Mr. Christensen said in an interview that Mr. Kerkorian supports GM’s management and is buying the stock, which was near a 13-year low this week, because it was “depressed.”“Mr. Kerkorian comes to the table here with no agenda and no proposals to make and just has faith that this company is going to exert itself as the strong company that it is,” Mr. Christensen said. GM said in a statement that it doesn’t typically “express a view on specific investor activity.”GM shares rose $5.03, or 18%, to $32.80 at 4:16 p.m. in New York Stock Exchange composite trading yesterday. It’s the biggest gain in at least 44 years, according to a Standard & Poor’s analyst, Howard Silverblatt.“We haven’t yet seen aggressive moves by Wagoner and his team,” a corporate bond analyst at Morgan Keegan in Memphis, Tenn., Pete Hastings, said. “They need to take some significant steps.”The purchase of 50 million shares would make Mr. Kerkorian GM’s third largest shareholder. His current stake represents about 3.89% of the company.Mr. Christensen said Tracinda doesn’t plan to raise the offer price for the shares when it begins a tender offer in about a week. Tracinda officials spoke to GM executives yesterday, he said.Tracinda holds a controlling interest in casino operator MGM Mirage. Mr. Kerkorian is ranked 41st on the Forbes list of the world’s wealthiest people, with a net worth estimated at $8.9 billion.As part of Mr. Kerkorian’s offer, stockholders will be entitled to keep GM’s 50-cent quarterly dividend, which is to be paid next month. On that basis, the offer is a 13.4% premium over GM’s closing price of $27.77 Tuesday, Tracinda said in the statement.Mr. Kerkorian, the son of an Armenian immigrant rancher in California’s San Joaquin Valley, became a billionaire by buying airlines and casinos for less than they turned out to be worth.In 1965, Mr. Kerkorian invested $3 million in Trans International Airways – an airline he had originally created – and later sold it Transamerica Corporation for $149 million. He bought his first casino in 1967 and built the 1,500-room International Hotel, then the largest hotel in Las Vegas.He bought the MGM film studio for the first of three times in 1970. His last MGM purchase was in 1996, for $1.3 billion in cash.Kerkorian began buying shares in Chrysler Corporation after the automaker had a third-quarter loss of $214 million in 1990. He paid $12.37 a share in December 1990 for his initial 22 million shares, then bought 6 million more shares at $10.13 each on October 10, 1991, as the company headed toward a full-year loss of $795 million.In December 2003, DaimlerChrysler lawyers estimated Kerkorian made about $2.7 billion on his Chrysler investment when the company was purchased by Daimler-Benz.

News of Kerkorian Raising GM Investment Sends Stock Soaring

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