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Kerkorian Buys Into Ford. For Love or Money?


Mercurial and often nettlesome financier Kirk Kerkorian is accumulating shares in Ford Motor Co. To be sorted out in the coming days and weeks is what the 90-year old with an affinity for gambling casinos, hotels, motion picture companies and car companies sees in the storied automotive icon.

Kerkorian’s firm, Tracinda Corp., announced it has acquired a 4.7 percent stake in Ford, and plans a $170 million cash offer for an additional 20 million shares.

The bid for a stake in Ford follows earlier, unsuccessful efforts by Mr. Kerkorian to buy Chrysler and force General Motors into an alliance with foreign automaker Renault-Nissan.

Tracinda said in a statement Monday that it has bought 100 million Ford shares since April 2 for about $690 million. On April 1, Ford shares closed at $5.97. Last week, Ford announced it has earned $100 million in the first quarter, much better than Wall Street had anticipated.

Ford shares closed at $7.50. Thursday, the day of the earnings announcement, Ford shares closed at $8.40. Goldman Sachs on Friday put a target price of $9.00 on the automaker. In mid-day trading on the NYSE after Kerkorian’s announcement was made, Ford was trading around $8.22 and closed at $8.21.

So, between April 2 and today, Ford shares have appreciated 38%. There is a reason why Kerkorian is a billionaire.

But while he bother the boards and managements of DaimlerChrysler and GM, it remains to be seen what trouble Kerkorian can cause at Ford. It has already sold off the Premier Auto Group. IT still has Volvo, but that’s because the offered prices weren’t high enough to buy it last year. It is likely still on the block to the right bidder. It has changed management. It is on track to make profit next year. And the Ford family controls 40% of the voting stock through its Class B shares. It’s a poison-pill structure that was built into the company back in the 1950s.

Ford appears to be doing everything it can to fix the company, end the losses and return to regular profits.

So far, Kerkorian’s investment looks good from a sheer return-on-investment standpoint. Maybe, that’s all he is doing—making money. But that doesn’t fit with his history of also seeking some control and influence at car companies, and getting a board seat.

Kerkorian’s investment advisor on the auto industry, Jerry York, had board seats at Chrysler and GM. Little came of it. I will have a seat on Ford’s board before the Ford family invites Jerry York to be on its board, or even feels pressure from Wall Street to do so.

On Monday, Ford confirmed that CEO Alan Mulally met with York in early April after York had a long standing request to meet with the CEO.

All we can do for now is stay tuned.


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