May 30, 2008 / 12:03 PM / 10 years ago

Kerkorian's Ford tender offer on track despite slump

DETROIT (Reuters) - Billionaire investor Kirk Kerkorian on Friday said he would move ahead with a tender offer for Ford Motor Co (F.N) shares, signaling a bigger bet on the automaker’s turnaround despite the recent slump in its stock and lowered financial outlook.

Kerkorian’s investment vehicle Tracinda Corp said it would continue to tender for 20 million Ford shares at $8.50 each, despite an 18 percent decline in the shares since the offer was launched on May 9.

Tracinda waived a condition that the market price of Ford not fall by 10 percent or more from the close of trading on May 8, a previously established escape that would have allowed Kerkorian to back out from his offer.

By pressing ahead, Kerkorian could establish a 5.5-percent stake in the struggling No. 2 U.S. automaker, raising the prospect that he will emerge as a player in its restructuring at a time when U.S. auto sales have slumped to decade lows and record gas prices have undercut sales of high-margin trucks.

An activist investor with a long history in Detroit, Kerkorian most recently held a nearly 10 percent stake in GM and made an unsuccessful bid to acquire Chrysler in 2007. He also made an offer that Ford rejected to buy its luxury Jaguar and Land Rover brands last year.

Kerkorian has said through Tracinda that while he may propose business strategies for Ford but is not seeking any chances to Ford’s board or executive management.

“Tracinda continues to believe in Ford’s management and turnaround efforts and remains committed to its offer,” the Beverly Hills, California-based investment company said in a statement on Friday.

Tracinda disclosed last month it bought 100 million shares of Ford at an average price of $6.91 and planned to buy an additional 20 million shares.

Shares of Ford rose as much as 3 percent on the New York Stock Exchange in initial reaction to Kerkorian’s announcement on Friday morning, but quickly gave back most of those gains

to trade up just 1 percent at $6.78.

Ford Motor warned last week that it no longer expected to meet a key target of returning to profitability in 2009 and would cut production through this year in response to a slumping U.S. auto market, triggering a sell-off in its stock and raising concerns about its two-and-a-half-year long restructuring effort.

    But some analysts and investors have credited Ford Chief Executive Alan Mulally with moving faster than embattled rivals to react to the most recent downturn in the U.S. market, triggered by gas prices near $4 per gallon.

    “Alan Mulally is more inclined to under-promise and over-deliver as opposed to over-promise and under-deliver, and I think Kerkorian has a lot of confidence in that,” said IRN Inc analyst Erich Merkle.

    Despite its continued losses, some analysts still see Ford as being ahead of its bigger rival GM, which is grappling with the costly legacy of its troubled former affiliates such as bankrupt auto parts maker Delphi Corp DPHIQ.PK and finance company GMAC.

    Ford posted a surprise $100 million profit in the first quarter thanks to cost-cutting, while GM lost $3.25 billion in the same quarter, hit by hefty charges for Delphi and GMAC.

    Ford said this week it is taking steps to cut its salaried workforce over the next two months through dismissals rather than more time-consuming buyouts.

    Kerkorian’s tender offer is scheduled to expire at 5 p.m. EDT on June 9 unless it is extended.

    Additional reporting by Lewis Krauskopf in New York; Editing by Derek Caney

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