Kerkorian to Buy 13.1 Million More Shares in General Motors
Billionaire investor Kirk Kerkorian will spend about $463 million to raise his stake in General Motors Corp. to 9.53% from 7.2% in a bet GM can end losses that totaled $1.4 billion so far this year.
Kerkorian’s Los Angeles-based Tracinda Corp., GM’s third-largest shareholder, said in a regulatory filing Thursday that it would increase its stake in the world’s biggest automaker with the purchase of 13.1 million shares in three private transactions. After the purchases, he will control 53.8 million of the shares.
GM spokeswoman Toni Simonetti said the company did not comment on the actions of individual shareholders.
Kerkorian, who sparked the biggest one-day jump in GM shares in 40 years when he first disclosed his ownership in May, is stepping up purchases after he failed to get as many shares as he had hoped in a tender offer in June.
He’s buying the stock just as the sales gains sparked by GM’s offer of employee discounts to all buyers are starting to wane.
“There’s so many problems there, he’s got to think that he’s got an answer and that he can influence the company or that they’ll just pay him to go away,” said Brian Bruce, who helps manage $18 billion in equity, including GM shares, at PanAgora Asset Management in Boston. “You’re not buying this because you think management has a good handle on what they’re doing.”
Tracinda purchased 5 million shares on Aug. 26 for $175 million and is scheduled to complete a purchase of 5.14 million shares today for $183 million, according to the Securities and Exchange Commission filing. It will buy 3 million more shares Tuesday for $105 million. Tracinda also entered into a $400-million credit facility with Bank of America Corp.
Kerkorian, 88, paid from $35 to $35.71 a share in private transactions, Tracinda said. Kerkorian, who controlled 22 million GM shares in early May, originally offered $31 a share to buy an additional 28 million. He ended short of his goal with 40.7 million shares when the tender offer expired June 7.
The investment comes after GM lost $3 billion building vehicles in the first half of this year as it cut production and paid higher incentive and marketing costs to clear unsold inventory.
Kerkorian a decade ago launched a failed takeover bid for the former Chrysler Corp. -- now part of DaimlerChrysler -- and won concessions that included a representative on the Chrysler board.
When he disclosed that he was buying shares in Detroit-based GM, the news pushed the automaker’s stock up 18%.
Kerkorian has said his investment in GM is “passive.” GM’s board has taken a neutral stance on his tender offer.
Kerkorian will invest $276 million of his own money and borrow about $187 million from Bank of America. The loans are unsecured. If the loan balance exceeds $200 million, Kerkorian will be required to pledge the GM shares as collateral.
The loan’s terms prevent Tracinda from making hostile transactions or buying in excess of 10% of a company without permission of Bank of America.
GM shares fell $1.22, or 3.6%, to $32.97. Through Wednesday, GM shares had risen 23% from the day before Kerkorian first announced plans to buy GM stock.
