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Last Updated: Wednesday, 4 May, 2005, 23:09 GMT 00:09 UK
GM shares jump on Kerkorian offer
Models pose on GM Cadillac CTS-V at Seoul Motor Show
US buyers have been turning away from GM in favour of foreign brands
Shares in US carmaker General Motors (GM) have surged 18% on news that billionaire investor Kirk Kerkorian has made an offer to buy a minority stake.

Mr Kerkorian, who once bought and sold MGM Studios, offered nearly $868m (457m) to buy 4.9% of GM stock.

Mr Kerkorian made the offer through his firm Tracinda Corp, saying the purchase was for investment purposes only.

If the $31-a-share (16.32) offer is accepted, it will take Mr Kerkorian's stake in GM up to almost 9%.

My guess is he feels that there's value in the brand and the franchise that has not been unlocked by current management
Richard Steinberg, Steinberg Global Asset Management

The offer for the 28 million shares represented an 11.6% premium on GM's closing price of $27.77 on Tuesday.

Shares in the company closed 18% higher at $32.80, amid optimism about what Mr Kerkorian's bid might mean for the future of the company.

GM had no immediate comment to make about the offer.

Game plan?

"I would assume Kerkorian believes General Motors is too important to the country just to be" left foundering, said Craig Hodges of Hodges Capital Management fund manager.

Meanwhile, other analysts questioned whether Mr Kerkorian's move was more significant.

"My guess is he feels that there's value in the brand and the franchise that has not been unlocked by current management," Richard Steinberg, president of Steinberg Global Asset Management in Florida, told Reuters.

However, speculation that Mr Kerkorian could be looking to win control of the firm by building up his stake was firmly denied by his lawyer Terry Christensen who said it was merely a "passive investment".

Struggling business

The offer comes just a day after US sales figures revealed GM was continuing to lose market share to foreign rivals, and just weeks after the group reported its biggest quarterly loss in more than a decade.

The firm blamed flagging sales and rising healthcare costs for its net loss of $1.1bn in the three months to the end of March.

As part of its restructuring plan, GM has been cutting jobs. It has also promised an "aggressive" rollout of new models in an effort to attract more buyers.

However, investor concerns remain.

Some fear the company's credit rating could be downgraded to junk status.

The main rating agencies - Standard & Poor's, Moody's Investor Service and Fitch Ratings - all rate the company at one notch above junk.

A downgrade to junk level could significantly raise the company's borrowing costs.

Chrysler case

Mr Kerkorian, an 87-year-old billionaire and majority shareholder of the MGM Mirage casino and hotel operator, is no stranger to the automotive business.

He was the largest investor in carmaker Chrysler ahead of its 1998 tie-up with Germany's Daimler-Benz.

He took court action against German car boss Juergen Schrempp, claiming the deal was misrepresented as a merger rather than a takeover.

Last month, a US district court dismissed his claim for $1bn in damages. Mr Kerkorian is appealing against the ruling.





SEE ALSO:
US car firms lose out to rivals
03 May 05 |  Business
GM recalls two million vehicles
26 Apr 05 |  Business
GM loses $1.1bn as car sales slow
19 Apr 05 |  Business
GM boss takes charge of division
04 Apr 05 |  Business
GM warns it may phase out brands
24 Mar 05 |  Business


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