Chrysler Doubles Stock Buyback to $2 Billion; No Deal Yet with Iacocca
DETROIT (AP) _ Hoping to blunt Kirk Kerkorian’s latest move in his drive to gain greater control of Chrysler Corp., the company’s directors took steps to augment the automaker’s value to shareholders.
But there was no public response from their meeting Thursday to Kerkorian’s announcement that he had recruited former Chrysler finance chief Jerome B. York from IBM Corp. to help him.
There also was no word on whether the company had reached a deal that would remove former Chairman Lee Iacocca from Kerkorian’s camp.
Chrysler announced it is doubling the size of a $1 billion program to buy back the company’s stock, a move expected to increase the value of shares. The action reflects an attempt to strike ``the right balance between current shareholder returns and long-term investment in the future of the company,″ Chairman Robert J. Eaton said.
It wasn’t enough for Kerkorian. ``It is another tiny step in the right direction,″ said Michael Claes, a spokesman for Kerkorian’s Tracinda Corp.
But it might help keep other shareholders happy, particularly the giant mutual fund company FMR Corp., which is the parent of Fidelity Investments and Chrysler’s second largest shareholder behind Kerkorian. FMR officials decline to discuss their Chrysler investment.
Most of Chrysler’s shareholders appear to have supported the company in its moves to foil Kerkorian’s aborted takeover proposal earlier this year, which he undertook with the aid of Iacocca.
The company blocked Iacocca’s attempt to cash in options for 112,500 shares of Chrysler stock in July because of his affiliation with Kerkorian. It said he violated stock plan rules that forbid him from working for anyone else without Chrysler permission and from doing anything that hurts the company.
But sources close to the situation, who spoke on condition they not be identified, said Iacocca was negotiating a deal that would allow him to use some of his 1.5 million options for Chrysler shares. In return, he would back away from Kerkorian, with whom he has a consulting contract and a lucrative agreement to share the profits from the gains on Kerkorian’s Chrysler investment.
One source said late Thursday that Iacocca was still waiting for word on the outcome of the negotiations, which were first reported in the Wall Street Journal.
Kerkorian in April floated an audacious proposal to take over Chrysler in a $55-a-share, $22.8 billion deal financed in part with some of the company’s cash reserves.
Chrysler rejected the proposal and said it was not for sale. Kerkorian then executed a $50-a-share tender offer to add 14 million shares to his Chrysler holdings. He and his associates control 14.1 percent of Chrysler’s stock.
Kerkorian has said his intent is to enhance the value of the company for all shareholders. Under pressure from him, the company began a $1 billion stock buyback that so far this year has resulted in the purchase of $706 million worth of Chrysler shares.
`1 Thursday’s announcement said the company would buy back $2 billion in stock by the end of next year.
Chrysler shares are trading in the $57 range on the New York Stock Exchange. The stock’s price has risen from less than $40 since Kerkorian announced his takeover proposal last spring.