Kerkorian offers $55
per for more MGM shares

Nov 28, 2006 4:34 AM

Home may be where the heart is but for billionaire Kirk Kerkorian home is MGM MIRAGE Inc. (MGM), where he likes to park his money.

After announcing last week that his privately-held Tracinda Corp. was going to reduce its holdings in General Motors (GM) by 14 million shares, he indicated that he planned to expand his MGM holdings by 15 million with an offer of $55 per share.

At the time the shares were trading in the $48 range, thus providing an immediate benefit to the shareholders.

"This tender offer," read a Tracinda statement, "demonstrates our confidence in MGM MIRAGE and its management and our commitment to the company’s future. Tracinda already holds 158.4 million MGM shares or about 56.3% of the company’s outstanding stock.

If the $55 offer for 15 million shares is accepted, it will raise Kerkorian’s holdings to 61.7%.

Gaming company analysts immediately jumped in with comments on Kerkorian’s move.

Wrote David Katz of CIBC Holdings: "The offer implies that the company is presently undervalued by the public markets. With shares trading on private-market speculation, we recommend investors continue to own the (casino) group, although the key risk is that the shares could return to fundamental valuations in response to some negative catalysts."

Of late, said one analyst, MGM MIRAGE has been an underperformer, primarily because of the company’s large concentration of holdings on the Las Vegas Strip. However, that has changed, particularly with the drop in gasoline prices.

Another analyst suggested that the move would cause some to speculate that MGM MIRAGE could go private at some point.

Others were of the mind that Kerkorian was merely underscoring his belief in the company.

"With CityCenter condo sales beginning in January and opening set for late 2009," wrote Robin Farley of UBS Securities, "this tender is a clear vote of confidence from MGM’s largest shareholder."