Kerkorian offers $170M for Ford stock

UPDATE Top Ford Motor Co. executives were told in early April that billionaire Kirk Kerkorian was interested in investing in the company, according to a document filed this morning with the federal government.

The filing with the U.S. Securities and Exchange Commission also outlines Kerkorian’s offer to purchase 20 million more shares, boosting his total stake to approximately 5.5%.

Kerkorian announced publicly on April 28 that he had already acquired 100 million Ford shares, a 4.7% stake in the company. Ford communications representatives have said that company officials learned of Kerkorian’s investment activity only two days before.

However, today’s filing with the U.S. Securities and Exchange Commission says that Kerkorian’s top automotive adviser, Jerry York, informed Ford CEO Alan Mulally and Chief Financial Officer Don Leclair that Kerkorian “had an interest in investing in Ford" through his Tracinda Corp. during a meeting April 4 at Ford headquarters.

Reports have said that Executive Chairman Bill Ford, other family members who hold a controlling stake of super voting shares, and company executives were taken by surprise April 26 when the company learned of Kerkorian’s purchases.

According to one report, which quoted an anonymous source, Bill Ford asked Mulally after the April 4 meeting: “Did York express an interest in taking a stake in Ford." The report said Mulally told Ford, “No."

After today’s filing by Tracinda, Ford issued the following statement:

“On April 4, during a meeting with Alan Mulally and Don Leclair, Jerry York made what we thought was an off-the-cuff remark that Tracinda might be interested in investing in Ford. Ford Motor Company did not know at the time that Tracinda had begun investing in Ford stock two days earlier, and we were completely unaware of Tracinda’s investment until the weekend of April 26 and 27. Bill Ford was as surprised as Alan Mulally and Don Leclair upon learning about the investment during the weekend of April 26 and 27. Any further comment will be included in our formal response to Tracinda’s tender offer." More at Detroit Free Press

04/28/08 Kirk Kerkorian's investment in Ford Motor Co. comes just a few weeks after his representative met with Ford CEO Alan Mulally.

Jerry York, a former auto executive who represents Kerkorian's Tracinda Corp., met with Mulally and Ford CFO Don Leclair in Dearborn, Michigan, a few weeks ago, a Ford official confirmed on Monday. Kerkorian, the 90-year-old billionaire investor, did not attend.

"The meeting was scheduled after Jerry York's long-standing request to meet with Alan Mulally," Ford spokesman Mark Truby said. "Ford executives routinely meet with industry executives and industry thought leaders to share perspective and gather feedback."

Truby declined to say whether the possibility of a Tracinda investment was discussed during the meeting. He said Ford Motor learned of Kerkorian's investment "over the weekend."

Tracinda announced on Monday that it plans to make a cash tender offer for up to 20 million shares of Ford stock at $8.50 per share. Tracinda already owns 100 million shares, representing 4.7 percent of Ford Motor's shares outstanding. Kerkorian's company began buying Ford shares April 2 and has paid an average price of $6.91 per share, Tracinda said.

The news boosted Ford shares 10 percent today on the New York Stock Exchange. Ford stock was trading at $8.26 a share at 12:12 p.m. Eastern.

Ford released a statement on Monday morning from Chairman Bill Ford and Mulally:

"We welcome confidence in Ford and the progress we are making on our transformation plan. Any investor can purchase Ford shares, which are sold on the open market. The Ford team remains focused on executing our plan to transform Ford into a lean global enterprise delivering profitable growth for all."

Tracinda said it has been following Ford closely and has found that the automaker's management is achieving "highly meaningful traction in its turnaround efforts."

Tracinda said Ford's improvement was reinforced by first-quarter results announced last week.

Ford beat Wall Street estimates by posting a $100 million net profit for the first three months of 2008. The improvement came despite a tough U.S. economy and was connected to much higher profits in Europe, a much narrower loss in North America and continued cost-cutting.

Kerkorian, known most for his holdings in casino giant MGM Mirage, now has pursued investments in all three Detroit automakers over the past several years. He tried to buy Chrysler and invested in General Motors, eventually placing York on GM's board and pushing for an alliance with Nissan-Renault.

Tracinda has not asked about putting a representative on the Ford Motor board, Truby said. He declined to comment on whether Ford would be willing to add such a board seat.

Because it is still controlled by the Ford family, Ford Motor is considered to have more ability to withstand pressure from Tracinda or other outside investors. The Ford family controls 40 percent of the shareholder vote through its special Class B stock with super voting power. The family owns 70,852,076 Class B shares.

Morgan Stanley analyst Jonathan Steinmetz said Tracinda is likely to modify its pattern of activist behavior because of the Ford family control.

"Something will have to give," Steinmetz said in a research note. "In this case, we believe Tracinda is unlikely to be activist in the conventional sense, given the voting structure."

Instead, Tracinda is likely to be a "constructive agitator" and ultimately could push for a seat on Ford's board of directors, the analyst said. York would be the likely candidate to hold any board seat allocated to Tracinda. AutoWeek

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