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Billionaire Has Contentious History With Auto Maker

By Annalisa Burgos
Thursday, 5 Apr 2007 | 3:01 PM ET
US Senate Majority Leader, Senator Harry Reid
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US Senate Majority Leader, Senator Harry Reid

Billionaire Kirk Kerkorian is looking to buy Chrysler--again.

Kerkorian’s investment firm Tracinda is offering $4.5 billion for DaimlerChrysler's loss-making Chrysler Group unit. But striking a deal may prove difficult considering Kerkorian’s contentious history with the U.S. automaker.

The 89-year-old financier was Chrysler's largest shareholder in the 1990s and tried to buy the company in 1995 with former Chrysler CEO Lee Iacocca. Chrysler rejected the offer, but Kerkorian later advocated the company's merger with Daimler-Benz in 1998. Kerkorian held about 13.75% of Chrysler at the time and stood to gain $5 billion from it.

That support fell apart in 2000, when Kerkorian filed an $8 billion lawsuit against DaimlerChrysler, claiming investors were fraudulently induced to support the joining of the two companies. Kerkorian also claimed he had lost money because it was not a merger of equals. Tracinda lost a nonjury trial and is currently appealing the case.

Tracinda’s offer could complicate talks between DaimlerChrysler and other possible bidders, including private equity groups Cerberus Capital Management and Blackstone Group and Canadian auto parts supplier Magna International. Another possible buyer is GeneralMotors, though insiders say it remains a long shot.

Last year, Kerkorian accumulated a nearly 10% stake in GM and pushed the automaker into alliance talks with rivals Renault and Nissan Motor. After GM rejected the proposed alliance, Kerkorian dumped the last of his stake in the company.

Kerkorian also has a record of trading properties in Las Vegas and Hollywood, most famously movie studio MGM, which he has owned three times. He sold MGM to Ted Turner in 1986 and bought it back months later. He sold MGM in 1990 and bought it for a third time in 1996 before selling it again for $3 billion to a group of investors led by Sony. In 2000, he took over Mirage Resorts in a $6.4 billion buyout to create casino and hotel operator MGM Mirage. The hostile bid pitted Kerkorian against casino magnate Steve Wynn, who had built the Mirage into a multibillion-dollar business.

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