Their friendship began five years ago at a Florida racetrack. Over lunch arranged by investment bankers, the two dickered over private planes and a movie studio. Billionaire investor Kirk Kerkorian couldn't persuade then-Chairman Lee A. Iacocca to sell him Chrysler Corp.'s Gulfstream Aerospace Technologies unit. And Iacocca wouldn't bite at Kerkorian's offer to sell a small stake in Metro-Goldwyn-Mayer Inc.
No deal--then. But something clicked between Kerkorian, the son of an Armenian fruit farmer, and Iacocca, the offspring of an Italian immigrant. "They talked the same language," recalls Alex Yemenidjian, a top executive at Kerkorian's Tracinda Corp. "And Kirk trusts his instincts a great deal."
OLD PALS. Enough by now for Kerkorian, 77, to enlist Iacocca, 70, in his $20.5 billion bid for Chrysler. The partnership isn't new, though: Shortly after that inconclusive 1989 lunch, the Las Vegas investor plunked down $272 million for 9.8% of Chrysler. In 1992, after a distraught Iacocca complained during a trip to the Barcelona Olympics that he was being forced out as Chrysler's chairman, Kerkorian turned friend once more. In a sharply worded letter, he urged the auto maker's directors to rethink their decision to push a reluctant Iacocca into retirement--later threatening to seek a board seat if they did not reconsider.
Will these two septuagenarians actually wage war again with Chrysler's board? Those who know him say Kerkorian, a courtly, painfully shy man, would only reluctantly wage a hostile takeover--even if pushed by the more volatile Iacocca. Indeed, Kerkorian backed down from his 1992 threat after meeting with a solicitous Robert J. Eaton, then Chrysler's chairman-designate, who wowed his biggest shareholder with glimpses of new models and plans for future cost-cutting. The "interests of the shareholders are being well represented" by the board, Kerkorian said in an ensuing statement. Chrysler also promised to discuss strategy with him.
Kerkorian hasn't always avoided confrontation. After accumulating 30% of Western Airlines, he demanded three seats on the carrier's board in 1972, eventually forcing out its chairman. But compromise is more his style: In 1981, he signed a 10-year standstill agreement that averted a takeover of Columbia Pictures. Later in the year, after quietly approaching Chris-Craft Industries Chairman Herbert J. Siegel to buy that company's 22% stake in Twentieth Century Fox Inc., he retreated when investor Marvin Davis offered $700 million for the film studio.
Discovering value is what Kerkorian has done best. He founded Trans International and turned it into a thriving regional airline, then used the sale proceeds in 1967 to enter the hotel business. He built the International Hotel in Las Vegas in 1968, then bought the MGM studio in 1969. He kept the MGM name, slapping it on his new Las Vegas casino, the MGM Grand, in 1974. The rest he sold off--Ted Turner bought MGM's library in 1986, and Giancarlo Perretti took other assets in 1990--for a total of more than $2 billion. His 74% stake in MGM Grand is worth over $1 billion now; his 10% of Chrysler, about $2 billion.
These days, Kerkorian has his hands full with MGM Grand, a $742 million company in the midst of a major expansion. Since 1993, Iacocca has sat on the MGM Grand board. The two friends, who often jet together aboard Kerkorian's private 727 from their Beverly Hills homes to the Vegas tables, have grown closer. Associates say Kerkorian, divorced himself, consoled Iacocca during his recent divorce from his third wife, Darrien. Kerkorian also contributed to a diabetes research fund Iacocca established in memory of his first wife, Mary, who died of the disease. Now their friendship has returned to business in a big way: The two could be buying back the company Iacocca never really wanted to leave.
A Work in Progress
Seventy-seven-year old Kirk Kerkorian made his first fortune in Las Vegas in the '60s (photo) and his second in Hollywood during the '70s. Now, the reclusive billionaire has made his move on Detroit:
DEC. 14, 1990
Kerkorian's Tracinda Corp. announces it holds 22 million Chrysler shares, a 9.8% stake. Chrysler responds by tightening its "poison pill" defense.
OCT. 10, 1995
Tracinda buys 6 illion more shares.
AUG 6, 1992
Kerkorian requests a meeting with Chrysler's directors. After discussions with the board, he withdraws his request for a board seat.
FEB. 5, 1993
Tracinda buys an additional 4 million shares.
NOV. 14, 1994
Kerkorian seeks permission to increase his stake to 15%. In a letter to directors, he details specific steps to revitalize Chrysler's stock. Two weeks later, the company announces a 60% dividend hike and a $1 billion stock buyback.
DEC. 29, 1994
Tracinda reports purchases of another 4 million shares, bringing Kerkorian's interest to 10%.
APR. 12, 1995
Tracinda announces a $20.5 billion bid for the 90% of Chrysler it doesn't already own.