Kerkorian Buying Ford Stake, Buying More Shares Rise

DETROIT, April 28, 2008; David Bailey writing for Reuters reported that billionaire Kirk Kerkorian, a veteran investor in the troubled U.S. auto industry, has taken aim at Ford Motor Co, looking to acquire a stake of 5.6 percent stake through his investment vehicle Tracinda Corp.

Kerkorian, 90, who previously held a nearly 10 percent stake in General Motors Corp and made a failed bid for Chrysler LLC last year, began amassing shares of Ford, the No. 2 U.S. automaker, on April 2.

Analysts were left to speculate on what Kerkorian's "end-game" would be for the investment and whether he would push for additional asset sales by Ford, which has agreed to sell Jaguar Land Rover to Tata Motors Ltd.

Tracinda said on Monday it already holds 100 million Ford shares, or about 4.7 percent, and plans a cash tender offer to acquire 20 million more shares, or nearly 1 percent of the stock, at $8.50 per share.

The tender offer represented a 13.3 percent premium over Friday's close and Ford shares rose 9.5 percent Monday.

Tracinda said it had been following Ford with interest since the start of the year and noted that the automaker posted a surprise first-quarter profit last week at a time when U.S. auto sales are slumping.

It said it believes that Ford management, led by Chief Executive Alan Mulally, would continue to show significant improvements in financial results.

Ford said the Kerkorian investment represented an endorsement of its turnaround strategy.

"We welcome confidence in Ford and the progress we are making on our transformation plan," Ford Executive Chairman Bill Ford and Mulally said in a joint statement.

The Ford family controls almost 40 percent of the voting power at the automaker through a separate class of shares established when the company went public in 1956.

Ford lost $2.7 billion in 2007 and $12.6 billion in 2006. It has forecast a return to profitability in 2009 after slashing costs in the U.S. by cutting jobs and closing plants.

Kerkorian has a long record as an interventionist investor in Detroit and his ownership of GM stock came with a short stint by his adviser, Jerry York, serving on GM's board.

York met in early April with Mulally and Ford Chief Financial Officer Don Leclair at Ford headquarters in Dearborn, Michigan, Ford spokesman Mark Truby said. York had requested a meeting with Mulally in 2007, he said.

KERKORIAN ADVISER MET WITH FORD

The meeting occurred after April 2, when Tracinda said it had begun to build its stake in Ford. The automaker did not learn of the investment until the past weekend, Truby said.

Truby said the meeting with York, who was a Chrysler executive during the turnaround under Lee Iacocca, covered a wide range of auto industry-related topics.

"Alan meets with people in the auto industry all the time," Truby said. "He's open to meeting with people."

An offer by Kerkorian to buy out the Ford family and an eventual merger with another international automaker would be "intriguing" but seemed unlikely, Calyon Securities analyst Mark Warnsman said in a note for clients.

Warnsman said further asset sales were possible, with Volvo being the most likely target. Ford's 33-percent stake in Mazda Motor Corp and its ownership of finance arm Ford Motor Credit both create more value as part of Ford than they would through a sale, he added.

Kerkorian's endorsement of Ford's direction under Mulally, a former Boeing Co executive hired in 2006 to take charge of Ford's turnaround, marked an apparent shift from the billionaire investor's more recent confrontational approach.

Kerkorian built a 9.9 percent stake in GM in 2005, a move that gave him leverage to place York on the automaker's board.

But Kerkorian and York, who had been seen as taking aim at GM Chief Executive Rick Wagoner, failed to broker a tie-up between GM and Renault-Nissan or to convince GM to spin off brands such as Saab and Hummer. Kerkorian sold his stake when GM rejected his proposals.

"We sense that Mulally's relationship with Kerkorian is, at least for now, fairly cooperative," JP Morgan analyst Himanshu Patel said in a note.

Bear Stearns analyst Peter Nesvold said the action was reminiscent of Tracinda's initial investment in GM, which was considered passive at first. But he said there was less opportunity for Kerkorian to agitate for changes at Ford because the automaker is further along in its restructuring.

Tracinda's average cost for the 100 million shares was about $6.91 per share. The tender offer would run another $170 million, bringing the total investment to about $861 million.

Kerkorian bid $4.5 billion for Chrysler in 2007. He sold off his $1.69 billion stake in GM at a slight loss before accounting for transaction cost and other expenses.

Additional reporting by Euan Rocha, Soyoung Kim and Kevin Krolicki; Editing by Maureen Bavdek and Tim Dobbyn