Kerkorian cuts GM stake, shares plunge

UPDATED: 11/22/06 4:40 P.M.

DETROIT (Reuters) -- Billionaire Kirk Kerkorian's Tracinda Corp. investment firm today said it had sold $462 million of stock in General Motors this week, cutting its stake in the automaker to 7.4 percent from 9.9 percent.

The news sent GM stock plummeting. GM stock closed Wednesday at $31.09, down 4.7 percent for the day. It was the largest one-day fall in percentage terms since Oct. 6, when the automaker said it would not seek an alliance with Renault-Nissan.

Since Friday, the GM's shares have dropped about 10 percent. The stock's decline was the biggest drag on the Dow Jones industrial average today.

News of Kerkorian's GM sale came on the same day that he announced a tender offer for $825 million of stock in MGM Mirage Inc. to almost 62 percent of the hotel and casino operator.

Kerkorian's dual moves touched off speculation that the billionaire investor, who has a history of trading corporate assets in Las Vegas, Hollywood and Detroit could be steering away from a protracted fight for control of GM's board.

"It signals that he pretty much is going to go quietly into the night," said Kevin Reale, an automotive analyst at AMR Research.

In a U.S. regulatory filing, Tracinda said it had agreed on Monday to sell 14 million GM common shares in a private transaction for $33 per share.

Representatives of Tracinda Corp and GM could not be immediately reached for comment.

Kerkorian's associate Jerry York resigned from GM's board on Oct. 6 in a dispute over board oversight and strategy triggered by the automaker's decision not to pursue the alliance with Renault-Nissan he head attempted to broker on Kerkorian's behalf.

York's resignation from GM's board -- and his public criticism of the oversight it provided GM management -- led many analysts to believe that Kerkorian could be gearing up for a proxy fight to take control of GM's board and oust Chief Executive Rick Wagoner.

But the stock sale appears to make that less likely, Reale said.

"Maybe he doesn't think there will be a blip in Rick Wagoner's plan -- showing he can't create the controversy he needs to change the board's direction," he said.

GM's 8 percent bonds maturing in 2031 fell less than a cent on the dollar to 109.50, in morning trading. There were no trades after the Tracinda announcement, according to MarketAxess.

Kerkorian first began amassing what became a $1.7-billion stake in GM in April 2005. He paid an average of just over $30 for the shares he acquired.

Tracinda sold shares once in that period. In December, Kerkorian sold 12 million shares for $252 million to show a loss for tax purposes and then bought back the same number in January for $263 million.

Kerkorian had been the catalyst behind the proposed tie-up between France's Renault SA and Japan's Nissan Motor Co., which he and York had seen as a way to accelerate GM's turnaround efforts.

Both Renault and Nissan are headed by Carlos Ghosn, and analysts had seen Kerkorian's proposed deal as a way to bring in an executive highly regarded for his turnaround success at Nissan.

But GM's board, including York, voted unanimously to break off talks with Renault-Nissan in early October.

Kerkorian, 89, responded by withdrawing plans to buy 12 million more shares in GM, something he had said he might do when the potential alliance was still on the table.

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