What’s Driving Kerkorian?
Kirk Kerkorian is the corporate version of “Guess Who’s Coming to Dinner.” The Los Angeles billionaire’s uninvited and unexpected knocks on corporate boardroom doors have caused sleepless nights, if not nightmares, for generations of executives in Hollywood, Detroit and Las Vegas.
So, naturally, the questions flew on Wednesday after the financier announced plans to boost his stake in General Motors Corp. to nearly 9%. Does Kerkorian’s latest Motown foray signal the return of the notorious Captain Hook, who empties corporate treasuries before moving on? Or did Kerkorian’s doubling down on his GM holdings mean what his personal attorney said it meant -- Kerkorian will be a passive investor hoping to cash in on the automaker’s hidden value? And, if it’s the latter, how patient can an 87-year-old investor afford to be? Especially with the company’s bonds reduced to junk status by Standard and Poor’s the day after he announced his proposed new stake.
We’d bet on anything but a passive investor. The newsworthy but media-shy businessman with a fortune estimated at $8.9 billion can change corporate landscapes just by walking into them.
During his time in Hollywood, Kerkorian bought and sold Metro-Goldwyn-Mayer Inc. -- three times -- with the last deal carrying a $4.9-billion price tag. Kerkorian began to reshape Las Vegas when he bought his first casino property in 1967; his Tracinda Corp. (named after daughters Tracy and Linda) now is majority owner of MGM Mirage Inc., one of the world’s largest hotel and casino companies.
Kerkorian also knows his way around Detroit. During the mid-1990s, he joined former Chrysler boss Lee Iacocca in a failed hostile takeover bid for the automaker. He’s still embroiled in a billion-dollar lawsuit alleging that executives at the combined DaimlerChrysler Corp. misled him about terms of their 1998 “merger of equals.” At stops along the way, the well-traveled Kerkorian honed the practice known as greenmail -- making investments in firms and betting that executives would pay him a premium to go away.
None of this explains why Kerkorian is back in Detroit to kick GM’s tires. Most investors have viewed the automaker, with its soaring healthcare and retirement obligations and a union that seems indifferent to its financial plight, as a mammoth trapped in the tar pits. Standard and Poor’s, explaining its decision Thursday, slammed GM’s management and strategy. Kerkorian, though, seems to see something else. But will he be the corporate raider hoping to extract go-away ransom? We’re rooting for the savvy investor whose presence shocks GM and its workers into focusing more intently on their uphill battle against foreign automakers.
