It’s down to crunch time on the auction for Chrysler and major private equity firms have lined up their bankers to support their buyout proposals, according to a report this morning from the Detroit News. Blackstone and Centerbridge—who are working together—have Bank of America, Lazard and Lehman Brothers in their corner. Meanwhile, Cerberus Capital Management LLC, is said to have recruited Goldman Sachs Group.
The General Motors bid, reportedly made way back in January, appears to have set off the star Chrysler sell off but to have been too skimpy to be seriously considered. All GM offered was 10 percent of its equity, no cash, and a requirement that DaimlerChyrsler pay GM $1 billion.
Six weeks ago we pointed out that GM seemed unlikely to pick-up Chrysler for this very reason
Another problem: GM boss Rick Wagoner is a tightwad. Remember the outsized dowry he and the GM board demanded from Ghosn when they considered the combination with Nissan-Renault? How much would GM pay up for Chrysler? When we called one of our banker friends to ask for a valuation on what GM might pay for Chrysler, he joked that GM might ask Daimler to pay them to take it off their hands.
The rumors circulating yesterday about Kirk Kekorian selling the remains of his stake in General Motors have now more or less been confirmed. Yesterday afternoon, when large blocks of the shares started hitting the market, people started to guess that Captain Kirk was beaming himself of off Planet General Motors. His attempts to install new leadership had been thwarted earlier, his red-shirted lieutenant had left the company’s board and Kerkorian seemed focused on other areas.
Now the Wall Street Journal quotes a “person close to the matter”–probably someone who works for Kerkorian talking off the record–confirming the sale.
Billionaire Kirk Kerkorian abruptly unloaded his entire stake in General Motors Corp., walking away with a modest profit but essentially conceding defeat in his aggressive 20-month effort to reshape the world’s largest auto maker.
A person close to the matter said Mr. Kerkorian, only recently GM’s largest individual investor with a 9.9% stake, had sold his last 28 million shares yesterday, nearly two months after his closest aide had quit GM’s board. The exit removed for now a threat to GM Chairman and Chief Executive Officer Rick Wagoner, who had come under pressure from Mr. Kerkorian’s top representative for moving too slowly to fix deep-seated problems such as high employee costs, declining car sales and overlapping brands.
Of course, the stock of GM has been pounded down recently and probably will continue to drop. DealBreaker’s rumor-mongering, paranoid friend–who we’ll stress has about as much access to Kerkorian’s inner thoughts as George Bush has to a path to victory in Iraq–wonders if all this isn’t a plot by Kerkorian to buy his way back in on a lower cost basis and after GM CEO Rick Wagoner has been humiliated by bottomed out stock prices. Activist Kerkorian Moves To Unload Entire GM Stake [Wall Street Journal]
Reports circulating that Kirk Kerkorian has sold his remaining 4.95% interest in General Motors (NYSE: GM). A large block of shares traded recently which is believed to be from Kerkorian. However, owning less than 5%, he doesn’t have to file any public information on his trading activity in the stock.
In an earlier 13D filing, Kerkorian disclosed they agreed to sell 14,000,000 shares which brought his stake to 28 million shares. It just so happens that a 28 million share block trade crossed the tape at 2:41PM at $29.25 per share.
Following last week’s announcement that he intends to buy more shares of General Motors, Kirk Kekorian has asked the General Motors board to hire an outside consultant to assess a possible alliance between GM and Renault. Even board members who aren’t enthusiastic about the alliance may support hiring an outside consultant, if only to hold off possible shareholder lawsuits if an alliance doesn’t come to fruitition.
In other news, General Motors may have fired Danielle Cicarelli as a spokeperson following the release of a video of the MTV personality getting a bit freaky with her boyfriend, a Merrill Lynch investment banker, on a Brazillian beach. Somehow this doesn’t seem like the kind of mistake Carlos Ghosn would have made. GM board to consider Kerkorian suggestion [Washington Times]
How much do you love Kirk Kerkorian, who owns nearly 10% of General Motors and recently proposed that the trouble car company enter into an alliance with Nissan and Renault? Pure evil genius. So what if GM faces declining profits, plummeting sales and a declining market for gas-guzzling SUVs in the age of Really Effin’ Expensive gasoline? Renault is 15% owned by the French government, otherwise known as the folks who own the exact same percentage of Airbus parent EADS. Of course they’ll go for it.
The French are like Life Cereal’s Mikey, but with cheese breath. They’ll eat anything.
Renault’s Ghosn May Take On Too Much With GM Tie-Up [Bloomberg]
Alcatel Jumps on Plan to Buy Lucent in $13.4 Bln Swap (Bloomberg)
It’s official; they’re merging. 8,800 jobs will be cut, Lucent’s Patricia Russo will be the first female CEO of a large French company, and nothing says bubble like Alcatel, the acquirer, jumping 8.8% on the news. The merger will be judged, obviously, on cost savings, which are possible given the bloat that these two aging giants must have — at least they didn’t say synergies. All in all, pipes are back. Om Malik notes the return of second-rate optical stocks, whose shares have surged in the past few months — at least they’re not calling them internet backbone companies. Microsoft’s Big Year (Barron’s)
Will this finally be the year of Ol’ Softy. After basically flatlining since 2001, Barron’s thinks the company may be back. Of course, they’ve been on the brink of being back before, but this time Barron’s means it. The case for the company is based on an upcoming product release cycle, the biggest in the company’s history, and renewed IT spending among corporations. It’s a bold argument, as the magazine calls the company a growth stock once again. At the same time, the company seems to be poorly run. Product delays, which have always been part of their reputation, seem to be getting worse, and it’s unclear that when (if?) the new Vista operating system will be released, it will have enough features to drive a rapid upgrade cycle. Remember when people were waiting in line on midnight the night before Windows 95 was released? Could you imagine anyone doing that on a cold night this coming January? Capex Revival, For Real This Time? (WSJ)
Here’s an argument we’ve heard a lot in the last year: When the consumer finally weakens because their credit card is tapped out, and their home stops rising in value so they can’t use it as an ATM anymore, capital expenditure will make up for the loss and save the economy. But will companies actually start investing, or is this just wishful thinking? After several years of saving money, there has been a tickup in hiring and investment, with capex expected to grow by 6.5% this year, slightly higher than the recent average. Still, it looks spotty and the article is only able to cite a handful of examples, like Hasbro buying a puzzle maker (so?), or Guess re-modeling 30 of their stores. Hmm… capex rebound, maybe not so much. Euronext looking for partner (Telegraph)
Stock exchange merger mania may continue, as Euronext may be the next suitor to try for LSE’s hand. Both Australia’s Macquarie, and more recently the Nasdaq, have been rebuffed when proposing to London. We’ll be really disappointed if, in ten years, we don’t have one single, global, 24-hour, 7-days a week electronic exchange that doesn’t list every publicly available stock, bond and commodity. So from our perspective, get mergin’ quick.