Kerkorian's Ford Tender A Puzzling Move

Posted by: David Kiley on June 10, 2008

Kirk Kerkorian’s Tracinda Corp. says that more than one billion shares of Ford’s common stock were offered as a result of the finacier’s tender of $8.50 a share. That’s about half of Ford’s outstanding common shares.

Tracinda will actually buy up just 20 million shares for about $170 million. It’s not surprising that Kerkorian got such a big response given that Ford shares are trading at just above $6.00 these days. Kerkorian’s offer will represent a nice premium over many investors’ cost of Ford shares.

But with most analysts pegging Ford’s share price in the next year to no more $8.00, and the Ford family controlling the voting shares, it remains to be seen what Tracinda gets out of this deal.

Kerkorian’s point man, Jerry York, has said the firm is just investing, and sees the restructuring work under CEO Alan Mulally paying off in the future.

But as I have said before, it’s hard to see where Tracinda, known for pushing companies to make overdue changes and asset sales, is going to wring anything out of Ford that it isn’t already doing. It has sold Aston Martin, Jaguar and Land Rover. There aren’t any buyers offering a fair price for Volvo.

Ford may well be worth $10.00 a share in 2010 if the economy cooperates even a little and Ford has a few product hits. But that’s two years off. It doesn’t seem like the kind of deal Tracinda and York pursue.

York tried to force a marriage on General Motors and Renault-Nissan, to no good end. Here is an idea. Perhaps York believes that Ford will be forced, with declining cash in a prolonged Recession, into an alliance with a foreign automaker, or that the Ford family will get behind a private equity acquisition. Under one of those scenarios, the purchase price on Ford would be a premium above what Tracinda is paying today.

But that scenario seems like a stretch given the scarcity of money in the debt markets today. And there are no signs that the family is ready to throw in the towel.

The mecurial York and Kerkorian are always up to something. What…we don’t know yet.

Reader Comments

James

June 10, 2008 11:46 PM

"Captain Kirk" is a cancer, pure and simple. He will accumulate lots of Ford stock and he will of course want to increase its value. If he was sincere in saying he believed in Alan Mulally and the plan Ford is already following, he (or York) would have kept his piehole shut and let the company proceed. Instead, almost immediately, York opens said piehole and starts stirring the pot. Never shy, Kerkorian and York will throw lots of ideas at Ford management, insisting that execs investigate the possibilities and distracting them from the matter at hand.

Memo to the Ford family: Remain Strong and United and, if you can, buy up some common shares in order to keep Kekorian at bay.

P.S. Let Mulally do his job. You chased away Donald Petersen. Don't make the same mistakes.

Leroy Sexton

September 25, 2008 11:13 AM

Ford Mulally is not getting the job done. Mulally need to listen to Kerkorian. Ford needed a four cylinder engine that can compete with foreign four cylinder engines and still do.. Now, it is time to output electric cars. Mulally is not gopoing to do either but Kerorian will. I am ready to buy ford stock when Kerkorian has more control.

glen tithof

October 25, 2008 10:42 AM

if the gm chrysler deal goes thru, ford will reap huge benefits.gm will can dodge,dodge trucks,for sure and possibly the car bussiness itself ,keeping the jeep line.that is when i jump in big time

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