UPDATED: 6/10/08 4:14 pm EDTWASHINGTON (AP) - Billionaire Kirk Kerkorian's investment company said Tuesday that its tender offer for 20 million additional shares of Ford Motor Co. attracted a huge response and will easily enable it to increase its stake in the automaker to about 5.5 percent.
Tracinda Corp. said in statement its tender offer of $8.50 a share drew offers of more than 1 billion of the company's shares. It will buy 20 million shares for about $170 million.
"Obviously the premium is a motivation, but the motivation is that you don't see the stock going higher than what the tender offer was," Argus Research analyst Kevin Tynan said.
"If shareholders believed that $8.50 was just the starting point and it would go higher from there, you would not see that kind of over-subscription to the offer," Tynan said.
Tracinda launched a cash tender offer on May 9 for the additional shares, which was a slight premium to the stock's May 8 closing price of $8.20. Ford shares have since declined more than 20 percent and closed Monday at $6.36, up 32 cents, or 5.3 percent.
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.
Ford's board of directors had said it was neutral and would express no opinion about the offer.
The No. 2 U.S. automaker announced last month that it no longer expected to return to profitability by 2009. Ford is cutting production in North America for the rest of this year as high gas prices and a weak economy cut into sales.
The tender offer officially expired at 5 p.m. on Monday. Tracinda had the option not to buy the additional shares under certain circumstances. They included: "any change or prospective change in the affairs" of Ford that has a "materially adverse effect" on the company or any event that "would adversely affect the extension of credit by banks or other financial institutions."
Ford said on Tuesday that broad shareholder interest in Kerkorian's tender offer was understandable given its large premium over the carmaker's current stock price.
"The Ford team remains focused on executing our plan to transform Ford into a lean global enterprise delivering profitable growth," Ford said in a statement.
Reuters contributed to this report