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Investor Kirk Kerkorian has a number of options after GM halts alliance talks

Investor Kirk Kerkorian has a number of options after GM halts alliance talks

Billionaire investor Kirk Kerkorian has a decision to make now that General Motors Corp. has decided against pursuing a three-continent alliance that he had sought.
Should he continue his attempt to buy additional shares in the company, seek a proxy fight to take control of GM's board of directors or simply sit back as GM pursues its turnaround plan?
Some analysts said Thursday they expect Kerkorian to keep the pressure on GM Chairman and Chief Executive Rick Wagoner as he works through a multiyear plan to make the world's No. 1 automaker profitable again after losing $10.6 billion (euro8.3 billion) last year.
"I would be surprised if (Kerkorian) took his money and went home," said Kevin Tynan, an automotive analyst with New York-based Argus Research. "He is an activist and I think he would be somewhat unfulfilled if he doesn't elicit some sort of change in this company."
Tracinda Corp., Kerkorian's investment company and the owner of 9.9 percent of GM, said Wednesday it was disappointed by the automaker's decision to halt talks with Renault SA and Nissan Motor Co., a courtship that the 89-year-old former movie mogul set in motion last spring.
An alliance would have "enabled GM to realize substantial synergies and cost savings" and Tracinda said it regretted "the board did not obtain its own independent evaluation of the alliance." Tracinda spokeswoman Carrie Bloom declined comment Thursday.
The decision by GM's board to scrap the talks was unanimous, meaning it included the support of board member Jerome York, a Tracinda adviser. Kevin Reale, research director for Boston-based AMR Research, said that indicated "Kerkorian is presenting some level of confidence in Rick Wagoner and his team to be able to drive the turnaround plan."
York, a former chief financial officer at Chrysler and IBM Corp., has served on the board since February. Tracinda said following York's election that it had amended his consulting agreement to clarify that York wouldn't share any confidential information about GM with Tracinda.
Kerkorian, who unsuccessfully tried to take over Chrysler Corp. in 1995, said last month he was interested in buying up to 12 million more shares of GM. The move would bring Tracinda's ownership to 12 percent, but they would need regulatory approval because GM owns banking and insurance interests.
Tynan said Kerkorian was less likely now to go through with those plans, especially with the company's stock trading near its 52-week high of $34.
"I think that carrot of additional shares was based upon the possibility of an alliance being formed. Now what's his catalyst?" Tynan said. He expected Kerkorian to await GM's third-quarter earnings report later this month before making his next move.
Morgan Stanley analyst Jonathan Steinmetz said in a note to investors that Kerkorian and York "face a fork in the road." He said they could stand pat and monitor GM's turnaround, sell the shares or attempt to increase their position within the company.
One way of increasing its position would be through a proxy fight against GM's management or an attempt to develop more support among shareholders. But the move would carry some pitfalls.
Such an attempt to reach GM's vast shareholders would likely cost between $30 million (euro23.5 million) to $50 million (euro39 million), said Peter Henning, a former attorney with the Securities and Exchange Commission who teaches at Wayne State University Law School. The automaker also would be able to use its own resources to fight off a proxy fight, he said.
GM has put up additional roadblocks, changing its corporate bylaws earlier this week to make it more difficult for aggressive shareholders to try to force changes at the company.
Henning said that while "it certainly looks like he's pushing for something more dramatic," an increase in Kerkorian's stake in the company would not necessarily offer a "tipping point" to help in a proxy fight. Relationships with institutional investors and key shareholders would be more important.
But Henning noted that "Kerkorian has awfully deep pockets. This is not a person who has to worry about funding _ Chrysler learned that."
"He's not in it for the litigation settlement. He's in to win," Henning said. "So this is a tougher opponent than you often see."


Updated : 2021-05-08 13:27 GMT+08:00