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Kerkorian raises eyebrows with GM bid
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Post Kerkorian raises eyebrows with GM bid 
http://www.baltimoresun.com/business/bal-bz.gm05may05,1,6711072.story?ctrack=1&cset=true

I haven't seen anyone commenting yet on this, so I thought maybe I'd start.

I wonder, strategically, what this will mean for GM. When Kerkorian tried to buy Chrysler when it was in the doldrums in the early 90s he started as a silent investor, but then took a more active role, and by the end of the 90s Chrysler was a German company. I can't imagine GM HQ leaving American soil, but this does raise some interesting questions. Anyone else have any thoughts???

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Can you post the article? I don't want to register for some paper that's going to send me junk mail.

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Post Investor offers $870B for 5% of GM stock 
Investor offers $870B for 5% of GM stock
JOHN PORRETTO
Associated Press

Published: 05/5/05 1:55 am

DETROIT - Kirk Kerkorian's Tracinda Corp. is offering to pay about $870 million for a nearly 5 percent stake in General Motors Corp. in a deal that would boost the billionaire investor's stake in the world's biggest automaker to nearly 9 percent. The announcement drove struggling GM's shares more than 12 percent higher in morning trading.

Tracinda said in a statement before the market opened Wednesday it was offering to buy up to 28 million shares, or 4.95 percent , of GM stock for $31 a share in cash, an 11.6 percent premium over GM's closing stock price Tuesday.

It said the proposed purchase was for investment purposes only.GM shares jumped $3.45, or 12.4 percent, to $31.25 in morning trading on the New York Stock Exchange. In recent weeks, they have dropped below $25 to levels not seen in more than a decade.

GM spokeswoman Toni Simonetti said the company had no immediate comment.The offer comes only weeks after GM reported its deepest quarterly loss in more than a decade - $1.1 billion - as rising health care costs and lackluster response to some new models hammered its North American business. With Asian automakers grabbing more of the market, its outlook is bleak. GM also is saddled with billions of dollars in post-retirement liabilities.

A big concern for investors at present is the potential downgrade of GM's credit rating to junk status, which would significantly increase the company's borrowing costs.

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http://www.freep.com/money/autonews/gm5e_20050505.htm

GM has got a few billion in cash right now. They are going to eat that up in the next couple of years if changes are not made. A shrewd group of investors could buy up a controlling interest share and force some changes, and then reward themselves handsomely. Kerkorian makes some people nervous, but he is successful. He has already bought up a significant amount of GM shares, he wants to buy more. I don't think he'll have that hard of a time finding sellers. Good God, imagine if Kirkorian got enough power to shutter GM and sell off all their assets! What is the book value of GM stock?

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No doubt Kerkorian has something planned. I am very curious what it is. On a somewhat related note, GM bonds, expectedly, achieved junk status today.

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Here's the whole article, but you shouldn't have to register to read it, at least not until it is archived:

Kerkorian raises eyebrows with GM bid
Billionaire's $870 million offer would make him 3rd-biggest shareholder
From Wire Reports
Originally published May 5, 2005
DETROIT - Billionaire investor and Las Vegas casino mogul Kirk Kerkorian has made an $870 million offer to become one of the largest shareholders of General Motors Corp., a move that boosted GM's previously plunging stock price and quickly caused a flurry of speculation about Kerkorian's motives.

Kerkorian, an aggressive investor who once tried to take over Chrysler Corp. and was its largest shareholder before it was acquired by German automaker Daimler-Benz AG, would quickly become GM's third-largest shareholder and could exercise enormous influence.

Tracinda Corp., Kerkorian's personal investment fund, quietly bought 22 million GM shares, or 3.9 percent of GM's shares in late April. Tracinda also said it was also offering $868 million, or $31 a share, for 28 million more GM shares. The offer, an 11.6 percent premium over GM's $27.77 closing price Tuesday, would boost Kerkorian's ownership stake to 8.84 percent of GM.

Because Kerkorian's recent purchase was below the 5 percent level that requires public disclosure of his investment, not even GM knew he had bought millions of its shares last month. The reclusive billionaire's sudden interest in GM is notable because he has a track record of taking aggressive actions with his past investments, from a very public but failed effort to take over Chrysler in 1995, to selling off huge chunks of MGM's valued film library, to suing DaimlerChrysler for $1 billion for allegedly misleading him in the 1998 merger deal.

Tracinda said the proposed purchase was for "investment purposes" only. It said it made the announcement yesterday morning because rumors of its interest in GM had begun to slip out.

Kerkorian confidant Terry Christensen said the move was "a sign of faith in the company" at a time many on Wall Street have fled GM. Tracinda contacted GM early yesterday to let the company know of its interest.

'A good day'

"It's a good day when a value investor like Kirk Kerkorian invests enough money to buy 50 million shares of that company's stock," said Christensen, Kerkorian's attorney and spokesman, who added that Kerkorian, 87, would not seek a seat on GM's board as he did with Chrysler. He likened this move to Kerkorian's bargain-basement purchase of Chrysler stock back in 1990, when the stock market shunned the smallest Detroit automaker.

In December 1990, when he bought a 9.8 percent stake in Chrysler, Kerkorian said he was only interested in being a passive investor. But less than five years later, he attempted an audacious takeover of Chrysler. That effort failed, but Kerkorian wound up on the board of directors.

News of Kerkorian's offer boosted GM shares 18 percent, or $5.03, as investors followed the lead of a man whose wealth Forbes Magazine pegs at $5.8 billion. It was the biggest one-day jump in GM's stock in more than two decades as more than 60 million shares of GM were traded, six times their normal daily volume.

As a result, the total value of GM stock jumped from $15.7 billion to $18.5 billion.

GM's stock price has fallen in recent weeks primarily because the automaker has refused to give Wall Street financial guidance for the year, citing a "health-care cost crisis." GM's one-day jump pulled up the overall stock market as well.

The automaker had little to say about Kerkorian's announcement.

"GM typically does not express a view on specific investor activity. GM's board and management are committed to enhancing shareholder value for all of our investors," the company said in a statement.

Christensen said Kerkorian had confidence in GM's management, including its chairman and chief executive, Rick Wagoner. "He's not really trying to judge management," Christensen said. "He's trying to judge the assets of the company, the ability of the company to right itself and get going strong again. He sees no reason why this management team can't do that. He believes they will do it."

Christensen said Kerkorian believed simply that GM had been oversold by the market and saw the investment as "a value investing play."

$1.1 billion loss

Last month, GM reported a $1.1 billion first-quarter loss, its largest quarterly loss in more than a decade. The company has been pummeled this year by falling sales in the United States, particularly in large sport utility vehicles, a key profit center for the company. Rising health care costs have also sapped the company; GM is the nation's largest private health care provider, giving coverage to 1.1 million American workers, retirees and their families. The array of problems has raised questions about GM's long-term viability, though most analysts believe it has adequate cash reserves to stave off bankruptcy in the immediate future.

News of the Kerkorian deal sparked a reassessment of the company's fading fortunes and questions about the extent to which Kerkorian would be a passive investor.

"If current management's plan does not seem aggressive enough, Tracinda or other investors could look to increase their control," said Stephen Girsky, an analyst at Morgan Stanley, in a note to investors. "This could pressure GM management to develop/implement a more aggressive plan to deal with its problems."

Merrill Lynch abandoned its sell rating on GM shares after the announcement.

"Given Kerkorian's successful track record of unlocking shareholder value, we feel we cannot continue to be a seller of GM and are therefore changing our rating to neutral," said John Casesa, an auto analyst at Merrill Lynch.

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