Kerkorian Cuts Ford Stake, May Exit as $1 Billion Bet Collapses

Oct. 21 (Bloomberg) — Billionaire Kirk Kerkorian may sell his Ford Motor Co. stake after the $1 billion holding lost two- thirds of its value and put his firm’s casino 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. Tracinda’s remaining 133.5 million shares were valued at $311.1 million based on yesterday’s closing price.

Kerkorian, 91, acted five days after Ford’s collapsing stock price forced him to pledge another 50 million shares of his MGM Mirage casino company to support the $600 million credit line used to buy stock in the second-largest U.S. automaker. Tracinda paid as much as $8.50.

“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 Ford to concentrate on gambling, hotels and energy, according to the filing, which didn’t give specifics.

Winnie Lerner, an outside spokeswoman for Tracinda with Abernathy MacGregor Group, declined comment about any companies in which Tracinda may invest. Tracinda is the majority owner of Las Vegas-based 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.

Ford’s Response

“We’re going to stay focused on our turnaround plan,” Mark Truby, a spokesman for Dearborn, Michigan-based Ford, said in an interview. “Any questions about Tracinda’s investment should be directed to Tracinda.”

Ford fell 6 cents to $2.27 at 10:36 a.m. in New York Stock Exchange composite trading, pushing their slide over the past year to 73 percent. MGM Mirage rose $1.46, or 11 percent, to $15.29. The shares dropped 84 percent this year before today.

Kerkorian disclosed in late April he had acquired 100 million shares of Ford, and said June 19 he had boosted his stake to 140.8 million shares, or 6.43 percent. He expressed support for Chief Executive Officer Alan Mulally‘s efforts to revamp the automaker after $23.9 billion in losses since 2005.

Under Mulally, Ford is cutting jobs and closing plants in North America, the region that’s the main reason for the automaker’s deficits. Ford also is developing new car and crossover wagon models to lessen its dependence on trucks. The company also is retooling three North American plants to produce small cars.

Still, industry sales have been plummeting this year, and less than a month after Kerkorian unveiled his investment Ford announced it was abandoning a goal for returning to profit in 2009. Ford hasn’t set a new target and also has said its rate of cash consumption is increasing, without releasing an estimate.

More Collateral

Tracinda’s pledge of additional MGM Mirage shares last week pushed the total collateral to 100 million shares for the credit line with Bank of America Corp. used to buy the Ford stock.

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 General Motors Corp. 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.

To contact the reporter on this story: Bill Koenig in Southfield, Michigan, at wkoenig@bloomberg.net

Last Updated: October 21, 2008 10:41 EDT
By Bill Koenig

Source: Bloomberg

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