Buyback ups Lion’s share of Capt. Kirk

MGM stockholders take Kerkorian offer

Kirk Kerkorian threw a party for MGM investors and almost everyone came.

When the tendering window closed last week on majority owner Kerkorian’s offer to buy up to 15 million shares of MGM stock at $16 per share, investors had submitted more than 65 million shares for sale.

The rousing response to the stock purchase offer was all the more remarkable considering that only 81 million shares of MGM were held by people other than Kerkorian.

Kerkorian and his Las Vegas-based holding company, Tracinda, offered to buy the shares in August. Because the offer was oversubscribed, each investor will be able to sell about 23% of the shares tendered.

After the buyback, Kerkorian’s stake in MGM will rise from about 66.9% to 73.1%, according to documents filed with the Securities and Exchange Commission on Friday.

On its face, Kerkorian’s offer seemed more than reasonable. MGM stock has not traded as high as $16 per share since April 2002 and has dipped into single digits on several occasions since then.

However, one MGM investor who decided not to accept the offer reasoned, “Kerkorian obviously thinks the company is worth more than $16 per share. If it’s worth that much to him, it’s worth that much to me, so I’m holding onto my stock.”

Kerkorian has given no public reason for buying the stock, leading to speculation that he may be preparing to take the company private or even sell it. However, federal disclosure regulations would require him to state such intentions if anything specific was in the works.

MGM announced two weeks ago that it would consider its own tender offer for shares once the Kerkorian offer was finished. Such an offer is one of several ways to reward stockholders, which MGM officials had promised to do if the company did not succeed in buying Vivendi Universal’s entertainment assets. Last month, Viv U announced it had reached a preliminary agreement with General Electric and NBC to sell its entertainment assets, including Universal Studios.

MGM stock closed down 51¢ Friday at $15.12.

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