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Kerkorian Cuts Ford Stake, May Exit as Bet Collapses (Update3)
By Bill Koenig
Oct. 21 (Bloomberg) -- Billionaire Kirk Kerkorian is unwinding his Ford Motor Co.stake after the auto industry recession cut the value of his $995 million holding by two- thirds and put his firm's gambling investments at risk.
Kerkorian's Tracinda Corp. sold 7.3 million Ford shares yesterday for an average of $2.43 each and said it contacted an investment bank about unloading the rest. The remaining 133.5 million shares were valued at $289.7 million today.
Kerkorian, 91, reversed course less than six months after expressing confidence in Chief Executive Officer Alan Mulally's turnaround efforts at Ford. Last week, Ford's collapsing stock price forced Kerkorian to pledge another 50 million shares of his MGM Mirage casino company to back the $600 million credit line used to buy into the second-largest U.S. automaker.
``It was an investment that made no sense,'' said Maryann Keller, an independent auto analyst and consultant in Greenwich, Connecticut. ``He's pulling in his horns and concentrating on areas he knows best.''
Tracinda ``intends to further reduce its holdings'' in Dearborn, Michigan-based Ford to focus on gambling, hotels and energy, according to a U.S. regulatory filing that didn't give details.
The investment firm is the majority owner of MGM Mirage, the world's second-largest casino company, and holds a 35 percent stake in Denver-based Delta Petroleum Corp., according to Bloomberg data. Winnie Lerner, an outside spokeswoman for Tracinda at Abernathy MacGregor Group, declined to comment on its plans for Las Vegas-based MGM Mirage or other companies.
Ford's Response
``We're going to stay focused on our turnaround plan,'' Mark Truby, a Ford spokesman, said in an interview. ``Any questions about Tracinda's investment should be directed to Tracinda.''
Tracinda's Ford shares cost an average of $7.07, according to data compiled by Bloomberg.
Ford fell 16 cents, or 6.9 percent, to $2.17 at 4:01 p.m. in New York Stock Exchange composite trading, pushing its slide in the past year to 74 percent. MGM Mirage rose 58 cents, or 4.2 percent, to $14.41. The shares have dropped 83 percent in 2008.
``He's gotten killed in both stocks,'' Joel Simkins, an analyst at Macquarie Securities USA Inc. in New York, said in an interview.
Tracinda's pledge of additional MGM Mirage shares last week doubled the total, to 100 million, put up as collateral for the credit line with Bank of America Corp. used to buy the Ford stock. That meant the loan was supported by 36 percent of MGM Mirage's shares, endangering Kerkorian's control.
Credit Line
Louise Hennessy, a Bank of America spokeswoman, declined to comment on whether Tracinda would now repay the credit line. Lerner also declined to comment on the borrowing or how long Tracinda may take to sell the remaining Ford shares.
Yesterday's sales ranged from blocks of 1.28 million shares to as few as 400, according to Tracinda's filing.
Kerkorian disclosed in late April he had acquired 100 million Ford shares, and said June 19 he had boosted his stake to 140.8 million shares, or 6.43 percent. Tracinda endorsed Mulally's efforts to revamp Ford with job cuts, plant closings and new car models after $23.9 billion in losses since 2005.
Yet even as Kerkorian unveiled his holding, conditions were worsening for Ford. On May 22, less than a month after the investor's initial filing, Ford abandoned a goal for a 2009 profit, and it hasn't set a new target. Cash consumption also is increasing, Ford has said, without giving a figure. Ford reported a record loss of $8.7 billion in the second quarter.
Auto Recession
U.S. industrywide auto sales fell 27 percent last month, the biggest decline since 1991, as the credit crunch made it harder for buyers to find loans. Ford's sales were worse, plummeting 35 percent.
The freeze on borrowing added to the battering from gasoline prices that surged to a record high in July and crimped demand for big pickup trucks and sport-utility vehicles sold mostly by Ford, General Motors Corp. and Chrysler LLC.
``Mr. Kerkorian is a smart investor,'' Shelly Lombard, a high-yield debt analyst at Gimme Credit in Montclair, New Jersey, wrote in a note today. ``Who needs the aggravation of trying to turn around a distressed company in a troubled industry in the middle of an economic downturn?''
Investment Forays
Kerkorian, ranked 27th on Forbes magazine's list of the richest people in the U.S., with a net worth of $11.2 billion, had made several forays into the auto industry before his Ford venture.
In 1995, he led a hostile takeover bid for the former Chrysler Corp. and won a board seat in exchange for calling off his attack. Later, he unsuccessfully sued the new DaimlerChrysler, accusing it of misleading investors about Daimler-Benz AG's 1998 purchase of the U.S. automaker.
DaimlerChrysler lawyers estimated in 2003 that Kerkorian eventually made $2.7 billion on his Chrysler investment.
After taking what he initially said was a passive position in GM in 2005, Kerkorian gained a board seat for his adviser, Jerry York, and tried to force the world's largest automaker to merge with Renault SA and Nissan Motor Corp. Rebuffed, Kerkorian dumped his investment with an estimated $106 million profit in 2006.
Last year, he was among unsuccessful bidders to buy Chrysler from Daimler AG. |
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发表于 2008-10-23 09:26
