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Is Kerkorian's Bid `A Big Hoax'?


Inside Wall Street

IS KERKORIAN'S BID `A BIG HOAX'?

What do takeover warriors of the 1980s such as Carl Icahn, Henry Kravis, Ron Perelman, the Bass Brothers, and Mike Milken think of the hostile Kerkorian-Iacocca attack on Chrysler (C)? They won't talk for attribution, and BUSINESS WEEK wasn't able to interview all of them. But the ones who spoke don't think a takeover will materialize. One of these pros privately described the Kerkorian caper this way: "The evidence clearly points to one thing--Kerkorian wants greenmail money, not Chrysler." So what's their advice? Short the stock. Icahn, for one, has taken big short positions in Chrysler.

"Believe me," says one veteran of several leveraged-buyout deals, "there won't be a takeover." In the end, both sides will agree to a buyback, he says--probably at a price below 55. "I've been there. I know when somebody seriously wants to acquire a company. This case tells me in so many ways that Kerkorian wants out," says another central character of many '80s takeover battles. "What Kerkorian is telling [Chrysler Chairman] Bob Eaton is that he [Kerkorian] will be a pain in the butt unless he's paid off. He has nothing to lose, and it's a smart move--for Kerkorian."

One sign that Kerkorian isn't serious about Chrysler: He didn't spend a dime lining up financing before he made his move. "Banks won't lend you money unless there is a clear way to a successful deal," says this pro.

"It's a catch-22, because a bank won't put up any money unless it's sure of success. But the courts won't throw out a poison pill unless the financing is there," he explains. He thinks this is why Kerkorian didn't put up any money for a bank to line up the financing. "He knew there wouldn't be a deal--so why risk, say, $100 million to get a financing guarantee? The offer is a big hoax," he says.BY GENE G. MARCIAL


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