Investor may have dumped GM stake
Investor Kirk Kerkorian on Thursday appeared to be cashing in his chips and exiting his high-stakes poker game with General Motors Corp. after 19 months.
The Beverly Hills billionaire and casino mogul, who at one point this year owned 9.9% of GM and had his own representative on the automaker’s board, disclosed Thursday that he had agreed to sell a second block of 14 million shares, reducing his stake to 4.95% after a 14-million-share sale Nov. 22.
But there was speculation late Thursday that Kerkorian’s investment company, Tracinda Corp., had dumped the rest of its holding in a third, unreported sale. A spokeswoman for Tracinda and Kerkorian said neither the investor nor his company would comment.
Merrill Lynch & Co. analyst John Murphy said a block of 28 million GM shares, equivalent to Tracinda’s remaining holding, was sold in a midafternoon transaction managed by Bank of America Corp. The selling price, Murphy wrote in a note to investors, was $29.25 a share.
If Tracinda was the seller of the stock that traded late Thursday, the deal would have given the firm a loss of about $10 million on all 56 million shares, not counting any dividends.
But Kerkorian, who paid an average of $30.24 a share for his GM holdings -- almost $1.7 billion in all -- would appear to be getting out with a small profit if he has sold only half his holding.
The sale of Tracinda’s second block of 14 million shares is set to close today at $28.75 apiece; the initial block was sold at $33 a share. Together, the two sales gave Kerkorian a gross profit of $1.27 a share, or $17.78 million.
Tracinda was required to report the first two sales to regulators because of the size of its stake, but once its holding fell below 5%, it would not have had to disclose information about any further sales.
On Thursday, GM shares fell 27 cents to $29.23.
The day’s news led some analysts to speculate that Kerkorian has pulled out completely after GM’s board rebuffed his push for the company to enter a three-way alliance with French automaker Renault and its Japanese partner, Nissan Motor Co.
The board’s vote to support Chairman Rick Wagoner’s position that GM didn’t need such an alliance to return its ailing North American automotive operations to profitability told Kerkorian “that his strategy wouldn’t allow him to do what he wanted,” said AMR Research auto analyst Kevin Reale.
Kerkorian advisor Jerome York quit GM’s board in October in a move triggered by his fellow directors’ decision to end the alliance talks. That initially led some analysts to wonder whether Kerkorian, backed by York, might launch a proxy battle to gain control of the board and fire Wagoner. But since Tracinda started selling shares, that talk has dwindled.
“He pulled his levers and not much happened. So why stick around?” asked analyst Ken Elias, an Arizona-based partner at automotive research firm Maryann Keller & Associates.
“It appears to me he is exiting,” said auto analyst Shelly Lombard of bond research firm Gimme Credit in New York. “Falling below 5%, if he still has any stock, certainly reduces his leverage.”
Lombard said she believed that by maintaining a large stake, Kerkorian “helped keep GM’s management on its toes, so I hate to see him go.”
But that’s not a universal sentiment. “He was a major distraction,” Burnham Securities analyst David Healy said. “I hope he’s all the way out so people can get back to worrying about what’s best for GM and not what’s best for Kirk Kerkorian.”
If the 28 million shares sold late Thursday were not Tracinda’s, Kerkorian would remain GM’s largest individual shareholder but would rank fifth overall. When he held his 9.9% stake, Kerkorian was the second-largest shareholder.
Separately Thursday, GM said it had completed the $14.1-billion sale of a 51% stake in its profit-making General Motors Acceptance Corp. finance unit to an investment group led by Cerberus Capital Management.
The sale provides GM with cash to help pay for job cuts, plant closings and development of new models on which it is pinning its turnaround hopes.
The Detroit automaker will receive $7.4 billion in cash from the purchasers, plus a $2.7-billion distribution from GMAC this year and $4 billion more in the next three years.
