Merger a Windfall for Kerkorian
Like a gambler in his home base of Las Vegas, Kirk Kerkorian bets his chips big. And when he’s right, as he usually is, the returns can be spectacular.
Kerkorian’s gamble on Chrysler Corp. paid off in a big way with the company’s merger deal with Germany’s Daimler-Benz in a $40-billion stock swap. Kerkorian’s personal net worth has now soared to about $5 billion, according to Forbes magazine’s daily online update of its Forbes 400 richest list.
Kerkorian’s Tracinda Corp., named for his daughters Tracy and Linda, is Chrysler’s single-largest shareholder. It owns 89.2 million Chrysler shares, which were worth $4.77 billion at the close of trading Thursday.
“It has been Kirk’s style to place huge bets in a very small number of areas, hold them and make a lot of money,” said his chief strategist, Jerome York, a former top Chrysler executive.
York said that Tracinda’s net investment in Chrysler is $650 million. Originally, the company paid $1.4 billion for 100 million shares, but has offset that purchase with dividends from the company, as well as stock sales it had to make to abide by an agreement with Chrysler to keep its investment under 13.75%.
Kerkorian’s windfall won’t turn into a war chest, York said, adding that Kerkorian plans to stay put and maintain his substantial position in the new auto concern.
“We anticipate being a very large shareholder going forward,” York said. “We believe in this transaction. We see very, very substantial value in putting these two companies together.”
Some speculate that tax issues may make selling the stake disadvantageous.
York specifically denied speculation that Kerkorian would buy British music giant EMI to complement MGM Inc., the publicly traded Hollywood studio Kerkorian bought last year.
“There is no substance to speculation that we are going to buy EMI,” York said. As for PolyGram, whose Dutch parent, Philips Electronics, is now shopping it around, York said he had not even heard the rumors that Kerkorian might be interested.
According to people close to him, Kerkorian is planning to move Tracinda and his base of operations to Beverly Hills from Las Vegas later this year because he wants to spend more time in Southern California, where he owns a home.
