Billionaire Kerkorian to increase stake in Ford; offers premium for 20 million shares

28 April 2008

Ford Motors seems to have found a new believer in its turnaround story, and Armenian-American billionaire, investor Kerkor "Kirk" Kerkorian, president of Tracinda Corporation, his private holding company based in Beverly Hills, California, is willing to stake billions in that belief.

Just a few days after the auto major surprised Wall Street analysts with an unexpected $100 million quarterly profit (See: Ford confounds analysts, posts $100 million profit in first quarter), news has come that Kerkorian's private investment vehicle Tracinda Corporation intends to make a cash tender offer for up to 20 million shares of the company at a price of $8.50 per share.

Tracinda, named after the billionaire's daughters Tracy and Linda, already owns 100 million shares or 4.7 per cent of Dearborn, Michigan- based Ford Motors. The offer price represents a 13.3 per cent premium over Ford's closing price of $7.50 yesterday, and the news has already sent the price soaring by 11 per cent in pre-market trading.

''We welcome confidence in Ford and the progress we are making on our transformation plan,"  Bill Ford executive chairman, and Alan Mulally, president and CEO, Ford Motor Co, said in a statement,   "Any investor can purchase Ford shares, which are sold on the open market.  The Ford team remains focused on executing our plan to transform Ford into a lean global enterprise delivering profitable growth for all.''

If the offer were completed, Tracinda would hold 5.6 per cent of the outstanding share capital. The firm had bought the initial 100 million shares at an average price of about $6.91 per share, making Kerkorian Ford's fourth-biggest shareholder.

This announcement marks the latest chapter in the investor's continued association with American auto companies. He held a 9.9-per cent stake in General Motors Corp at one time but sold that stake in 2006, when GM rejected his proposed tie-up with Nissan Motor Co and Renault.