Ford investors flocked to Kirk Kerkorian's offer to buy 20 million additional shares of the company, a move that will help the billionaire investor increase his stake in the automaker to about 5.5 percent.
Kerkorian's Tracinda Corp. said Tuesday that its tender offer of $8.50 a share drew overtures of more than 1 billion of the company's shares, or nearly half of Ford's outstanding stock. Tracinda will buy 20 million shares for about $170 million.
Analysts said the enthusiastic response was not surprising given the trajectory of Ford's stock price in recent weeks. When Tracinda launched the cash tender offer on May 9 for the additional shares, it offered a slight premium to the stock's May 8 closing price of $8.20.
Ford shares closed down 24 cents, or 3.8 percent, to $6.12
Ford's stock price has slid in recent weeks amid record-high gasoline prices, a sluggish economy and the company's announcement that it no longer expects to return to profitability by 2009. The company is cutting production in North America for the rest of this year.
"The offer was a modest premium to (Ford) shares when originally launched, but the share price has retreated over 20 percent since then," wrote Efraim Levy, a senior industry analyst with Standard & Poor's, in a note to investors.
Ford spokesman Mark Truby said the investor response was "understandable given that the offer represented a significant premium over Ford's current share price."
"The Ford team remains focused on executing our plan to transform Ford into a lean global enterprise delivering profitable growth for all," Truby said in an e-mail.
Tracinda declined comment on the tender offer. The investment company said in early May that it did not have any "present intent to acquire or influence control over the business of Ford."
But Kerkorian's company said it would continue to keep watch over Ford and "may, from time to time, propose business strategies and ... acquire additional shares."
Providing itself more flexibility, Tracinda said in a regulatory filing last month that it had added $100 million to its line of credit, allowing it to borrow as much as $600 million from Bank of America.
David Healy, an auto analyst with Burnham Securities, said Tracinda could acquire additional shares but would expect the investment company to do so in the open market.
"I think he'd like to create the impression that he's going to influence management and his deputy take a leading role in management. But that's Kerkorian's style. He would like to create the impression that Ford is in play when it isn't," Healy said.
The Ford family owns 3 percent of the company's shares but has 40 percent voting rights through a special class of stock, insulating the automaker from a takeover.
Kerkorian, 90, rarely has acted passively as a major shareholder and has tried to leave his imprint on the U.S. auto industry. He attempted to take over Chrysler during the 1990s and invested heavily in General Motors Corp. in 2006 in an attempt to foster an alignment with Nissan Motor Co. and Renault SA.
Tracinda has expressed confidence in Ford's overall strategy, but Jerry York, a top Kerkorian adviser and former Chrysler chief financial officer, has suggested Ford should sell its Mercury and Volvo brands. Ford has defended its handling of the brands.
Tracinda began accumulating 100 million Ford shares, or 4.7 percent of the outstanding stock, on April 2 at an average cost of $6.91 per share, meaning Kerkorian has lost money on his investment thus far.
Ford's board of directors said it was neutral and would express no opinion about the offer, which officially expired at 5 p.m. Monday.