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Kerkorian's Move Boosts GM Shares

Billionaire investor Kirk Kerkorian is looking to expand his 9.9% stake in General Motors (GM) just as talks about a broad alliance between GM and two foreign automakers turn rocky.

GM shares jumped more than 2% to touch a new 52-week high of $33.64 on Sept. 28 after Kerkorian's investment vehicle, Tracinda Corp., said it was considering acquiring as many as 12 million more shares of the troubled auto giant. The stock settled 2.4% higher at $33.06.

Analysts widely viewed the move as Kerkorian's effort to energize GM's negotiations with Carlos Ghosn, who heads GM rivals Renault SA and Nissan Motor (NSANY), regarding a strategic alliance Kerkorian supports. With a larger GM stake, Kerkorian could further pressure CEO G. Richard Wagoner Jr., who has long sought alternatives to an alliance with Renault-Nissan. Earlier this week, Wagoner and Ghosn agreed to extend their companies' talks through Oct. 15 (see, 9/26/06, "Will Wagoner Walk Away?").

MORE THAN 10% STAKE. Tracinda sent Wagoner a letter expressing interest in acquiring about 6 million shares of GM's common stock in the open market and up to an additional 6 million shares. Such a deal would result in Kerkorian owning more than 10% of the Detroit automaker, which would trigger government scrutiny. The letter was filed with the Securities & Exchange Commission on Sept. 28. "Your support will maximize the likelihood of obtaining regulatory approval," Tracinda wrote in the letter. "We welcome the opportunity to discuss this matter further with you."

Tracinda added in its SEC filing that it continues to see "strong opportunity" in a potential alliance between General Motors, Renault, and Nissan. It said there should be strong GM board involvement in the analysis of such a potential alliance, including the counsel of outside advisers.

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