Shareholders offer to sell half of Ford Motor's stock to Kerkorian

A lot of Ford investors are apparently quite eager to get rid of their shareholdings, especially when offered a premium in the current economic downturn. Billionaire Kirk Kerkorian's investment company Tracinda said on Tuesday that its tender offer for 20 million additional shares of Ford Motor Co. had attracted a huge response and will easily enable it to increase its stake in the automaker to about 5.6 per cent.

The stockholders offered to sell 1.02 billion shares - or nearly half of the total outstanding - for the struggling No. 2 US-based automaker, Tracinda said in a statement. At present, the company has 2.17 billion outstanding shares.

Ford warned in May that it would not meet its long-standing goal of returning to profitability in 2009. The shares closed at $6.36 Monday on the New York Stock Exchange, or more than $2 below the $8.50 tender offer price, which analysts say was the main reason behind the oversubscription, and also that shareholders do not expect the stock to rise any further.

Investor interest in the tender was "understandable" given the significant premium over the current stock price, said Ford spokesman Mark Truby. "The Ford team remains focused on executing our plan to transform Ford into a lean global enterprise delivering profitable growth," the Dearborn-based company said.

Kerkorian chose not to enforce an escape clause that would have enabled him to renege on the tender offer, even after the share price eroded rapidly after the announcement had been made on 28 April. (See: Kerkorian reasserts faith in Ford; goes ahead with tender offer without escape clause)

On completion of the offer Tracinda would hold 5.6 per cent of the outstanding share capital. The firm had initially bought 100 million shares at an average price of about $6.91 per share, making Kerkorian Ford's fourth-biggest shareholder. These shares had been brought over a month starting 2 April. (See: Billionaire Kerkorian to increase stake in Ford; offers premium for 20 million shares)

Times have changed since Tracinda first made the offer on 28 April. Then the stock price was hovering around $7.50 as compared to $6.36 today, and the automaker had declared an unexpected first-quarter profit unlike the gloomy predictions made recently when the target date for profitability was pushed back.

Since the offer, the share price has declined by 20 per cent, production has slowed and major cuts in the workforce are in the offing. However, Tracinda and Kerkorian continue to have faith. (See: Ford extends cost cutting measures, may prune 12 per cent of salaried workforce)

The tender offer officially expired at 5 pm on Monday. Tracinda had the option not to buy the additional shares under certain circumstances. They included: "any change or prospective change in the affairs" of Ford that has a "materially adverse effect" on the company or any event that "would adversely affect the extension of credit by banks or other financial institutions."