Kerkorian ups stake in Ford; Mars to buy Wrigley; Continental calls off merger with United

By Paul A. Harris

St. Louis, April 29 - Kirk Kerkorian's Tracinda Corp. announced on Monday that it plans to tender for up to 20 million shares of Ford Motor Co. common stock at $8.50 per share.

The offer price represents a 13.3% premium over Ford's closing stock price of $7.50 on April 25, and a 38.7% premium over the closing price on April 2, the day upon which Tracinda began accumulating shares in the company, according to a Tracinda press release issued on Monday.

The 20 million new shares represent approximately 1% of the outstanding Ford common stock, and will increase Tracinda's stake to approximately 5.6% from 4.7%.

Deja vu

Burnham Securities Inc. automotive stock analyst David Healy told Prospect News on Monday that Kerkorian's upping his stake in Ford is deja vu all over again.

The analyst recounted how Kerkorian made an unsuccessful bid for Chrysler last year and pushed for General Motors to form an alliance with Nissan Motor Co. and Renault SA in 2006 after acquiring nearly 10% of GM stock.

Healy's take is that Kerkorian will remain a portfolio investor in Ford, as opposed to an activist shareholder.

"I believe that his aim here is to stir the pot and make money," Healy said of Kerkorian.

"I don't think that he is after management here the way he was at Chrysler or at General Motors, the main reason being that a takeover is more or less ruled out because the Ford family, while it owns just a small percentage of the stock, still has 40% of the voting power."

Ford: Good news on the surface

On Monday Ford's shares (NYSE: F) closed at $8.21, $0.29 below the tender price, but up 9.47% on the day, or $0.71 per share.

Healy asserted that if you are following the Ford story by means of the large print headlines in the financial pages, everything looks pretty good.

The smaller print, however, is less sanguine.

"A week ago today there was a very optimistic article in the Wall Street Journal about Ford's turnaround," the analyst recalled.

"Then last Tuesday Ford reported first quarter earnings of $0.20 per share, which on the surface looked terrific.

"But then analysts began picking it apart, and almost all of the earnings could be accounted for by one-time factors, some of them rather strange, such as upwards revaluation of inter-company loans and profits on commodities hedges and a one-time inventory buildup of pickup trucks at the dealers."

After the closer look, Healy said, Ford actually more or less appeared to have broken even in the first quarter, despite the progress in North America and Europe.

A merger to chew on

Elsewhere on Monday, Mars, Inc. announced a merger agreement with Wm. Wrigley Jr. Co. (NYSE: WWY) in a transaction valued at approximately $23 billion.

Under the terms of the agreement, Wrigley will become a separate, stand-alone subsidiary of Mars.

Shareholders of Wrigley will receive $80 in cash for each share of common stock and class B common stock.

Based on Wrigley's closing share price of $62.45 on April 25, and its three-month weighted average share price of $59.88, this represents a premium of 28.1% and 34%, respectively, to Wrigley stockholders.

Following completion of the merger, Bill Wrigley, Jr. will remain executive chairman of Wrigley, reporting to Paul S. Michaels, president of Mars.

Shares of Wrigley (NYSE: WWY) gained 23.15% on Monday, up $14.46, to close at $76.91.

Solo flight

Also on Monday Continental Airlines, Inc. disclosed in a message to its employees that it will not merge with another airline at this time, putting to rest speculation that Continental would merge with United Airlines parent UAL Corp.

In the message, Continental told employees that the board believes the risks of a merger currently outweigh the potential rewards, given Continental's prospects on a standalone basis.

"We have significant cultural, operational and financial strengths compared to the rest of the industry, and we want to protect and enhance those strengths - which we believe would be placed at risk in a merger with another carrier in today's environment."

"While some would prefer to see Continental pursue a merger, we strongly believe we have made the right decision - one that is in the best interests of our stockholders, co-workers, customers and the communities we serve."

In a Monday session which saw some strength in the stocks of the legacy air carriers, both Continental and United shares were lower.

Continental (NYSE: CAL) lost 1.51%, or $0.26, to close at $16.96.

United (Nasdaq: UAL) lost $0.40, or 2.63%, and closed at $14.81.

Meanwhile Delta Air Lines, Inc. and Northwest Airlines Corp. both closed higher.

Delta (NYSE: DAL) gained 2.57%, or $0.18, and closed at $7.19.

Northwest (NYSE: NWA) was better by 0.79% at $7.62, up $0.06 on the day.

Another Grand Theft

Elsewhere Monday shares of Take-Two Interactive Software Inc. (Nasdaq: TTWO) gained 1.03%, or $0.27 per share, to close at 26.47.

The trading took place on the eve of the highly anticipated release of Take-Two's newest version of its flagship video game, Grand Theft Auto IV.

Take-Two is the target of a hostile takeover bid by Electronic Arts Inc. - an offer that was recently decreased by Electronic Arts to $25.74 per share from $26 per share.

Electronic Arts (Nasdaq: ERTS) closed lower on Monday, down 0.58%, or $0.30, to close at $51.83.

Monday's situations took place against a backdrop of mixed trading on the major U.S. indexes.

The Nasdaq eked out a 0.06% gain, closing at 2,424.40, up 1.47 points.

Meanwhile the Dow Jones Industrial Average and the S&P 500 gave up ground.

The Dow dropped 0.16%, or 20.11 points, and closed at 12,871.75.

The S&P 500 ended 0.11% lower on Monday at 1,396.37, off 1.47 points.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.