Ford Motor investors, reflecting pessimism over its near term prospects, responded to billionaire Kirk Kerkorian's offer to buy their shares at a large premium by tendering nearly half of the automaker's stock.
Stockholders offered to sell Kerkorian 1.02 billion shares of Ford in response to his offer to acquire 20 million shares at $8.50, Kerkorian said Tuesday through his Tracinda Corp investment vehicle.
Shares of Ford , which warned in May that it would not meet its long-standing goal of returning to profitability in 2009, were down nearly 4 percent at $6.10 Tuesday on the New York Stock Exchange.
"Obviously the premium is a motivation, but the motivation is that you don't see the stock going higher than what the tender offer was," Argus Research analyst Kevin Tynan said.
"If shareholders believed that $8.50 was just the starting point and it would go higher from there, you would not see that kind of oversubscription to the offer," Tynan said.
Investor interest in the tender was "understandable" given the significant premium over the current stock price, Ford said in a statement that added that the carmaker remained focused on executing its turnaround plan.
Kerkorian, who also offered to buy the luxury Jaguar and Land Rover brands from Ford last year, acquired 100 million shares of Ford in April and announced the plans for the tender offer, electing to proceed even after Ford's profit warning.
Tracinda's 100 million shares were acquired at an average price of $6.91 in April, putting that stake underwater. He will buy about 1.97 percent of the shares tendered by investors, raising his stake to more than 5 percent overall. The Ford family holds about a 3 percent stake in the automaker, but controls about 40 percent of the voting power because of a separate class of shares established when it went public in 1956. Family members also hold an undisclosed amount of the regular common stock.
Kerkorian has long-standing ties to Detroit as an activist investor lobbying for aggressive changes. He was Chrysler's leading shareholder when the company merged with Daimler-Benz more than a decade ago and made an unsuccessful bid for Chrysler in 2007.
When he also held a nearly 10 percent stake in General Motors in recent years, he lobbied for brand changes and worked to place his investment adviser, Jerry York, on GM's board.
Kerkorian expressed support for Ford's turnaround efforts and management team led by Chief Executive Alan Mulally when he announced his plans for the tender offer.
Ford has said it must restructure its business to account for a permanent shift in consumer demand toward cars and crossovers, and away from the large trucks and SUVs that had been a staple of profits in past years.
U.S. auto sales have continued to slump amid the slowdown in the U.S. economy and consumers have abandoned the larger vehicles under the steep rise in gasoline prices to about $4 per gallon nationwide.
In May, Ford's F-Series trucks were outsold on a monthly basis for the first time in 17 years, by four car models.
Ford shares were off 19 cents, or 2.99 percent, at $6.17.