Kerkorian's Ford Tender Offer on Track Despite Slump
Billionaire investor Kirk Kerkorian will move ahead with his tender offer for Ford shares despite a recent slump in the No. 2 U.S. automaker's stock, pushing shares up as much as 3 percent.
Kerkorian's Tracinda said it would continue to tender for 20 million Ford shares at $8.50 each, despite an 18 percent decline since it launched the offer on May 9, a selloff triggered by Ford's recent outlook cut.
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.
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, which would raise his stake to about 5.5 percent.
Shares of Ford rose as much as 20 cents to $6.91 shortly after the opening bell on the New York Stock Exchange. They have since erased most of those gains.
Kerkorian's commitment to the tender offer could support the stock price and help protect his existing investment in Ford to a certain extent, analysts said.
"It's possible that the news could give a little bit of shot to Ford shares but it will be temporary," Erick Merkle, an analyst at IRN.
"(Ford CEO) 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."
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 selloff in the stock.
Ford is also taking steps to cut its salarized workforce, a drastic measure it has tried to avoid in its more than two-year-old restructuring.
Kerkorian's tender offer is scheduled to expire at 5 p.m. EDT on June 9 unless it is extended.
"Tracinda continues to believe in Ford's management and turnaround efforts and remains committed to its offer," Tracinda said in a statement.
Tracinda also said a waiting period on the tender offer under U.S. antitrust law expired on May 23.