It Worked At Lotus. Will It Work At Chrysler?

In Las Vegas, where Kirk Kerkorian made his fortune, it's called doubling down.

With his June 26 move to double his $700 million bet on Chrysler Corp. by buying an additional 4% of the company's stock--thus raising his stake to 13.6%--the Vegas financier is showing he doesn't intend to walk away from the action at the nation's No.3 auto maker. Kerkorian's latest tender offer for 14 million shares is yet another attempt to pressure the Chrysler board into doing something more to hike the company's lagging share price.

Since May, when his privately held Tracinda Corp. withdrew its $20.5 billion hostile bid for Chrysler, the 77-year-old Kerkorian has ceased activity on his takeover. The once furious pace of meetings with potential partners and bankers has ended, says longtime lawyer and adviser Stephen D. Silbert. Kerkorian is no longer canvassing other shareholders, either. Instead, he will reassess his options after his new tender offer expires on July 25. "We're ruling nothing out," says Silbert, "except selling our shares."

BATTLE PLAN. Despite Kerkorian's efforts, Chrysler shares, currently trading at around 48, are still below their Jan. 3 level--while the shares of both Ford Motor Co. and General Motors Corp. have risen (chart). And when Chrysler board members respond to Kerkorian's current tender offer in mid-July, as securities laws require, Kerkorian's troops intend to mount an attack on any response that does not include a plan to boost the share price, sources say. "There's so much excess cash coursing through their veins that Chrysler stock should be worth at least $65 to $70 a share," says John B. Neff, a portfolio manager at Wellington Management Co., Chrysler's second-largest institutional holder, with more than 15 million shares.

But with no partners or financing in place for an outright buyout, Kerkorian may be down to his last card. His lawyers at Fried, Frank, Harris, Shriver & Jacobson are contemplating a consent solicitation at the end of the summer. This little-used gambit, by which Kerkorian would try to install his own slate of directors without waiting for Chrysler's annual meeting to roll around next spring, is a long shot. But Ker-korian was encouraged recently when IBM forced Lotus Development Corp. into a takeover partly by filing a consent solicitation.

The dealmaker's dream, according to one source close to his team, would be for Chrysler management to back down in the face of such a move and to propose a massive repurchase of its shares. Silbert says that Kerkorian might be satisfied if the corporation plunks down a big chunk of its $7.3 billion cash hoard to supplement a $1 billion buyback already under way.

MONEY TROUBLE. To bring Chrysler Chairman Robert J. Eaton to the table, however, Kerkorian will need more than investment bankers Wasserstein Perella & Co. and his small army of lawyers. The IBM consent solicitation worked quickly and effectively, says Wertheim Schroder Vice-Chairman Peter M. Schoenfeld, a takeover expert, because it was backed with an all-cash offer. And Chrysler executives doubt Kerkorian could muster that. "He still has all the financing problems he had before," says a source close to Chrysler's board.

Chrysler is making sure that Kerkorian continues to have trouble lining up backers. By threatening to take away business from any bank that breaks ranks, the carmaker has forced almost every major U.S. institution to shun Kerkorian. Even Bank of America, which has bankrolled Kerkorian for nearly four decades, stressed that his $900 million credit line could be used only for the tender offer, not a larger bid.

Kerkorian may surprise everyone and launch another bid for all of Chrysler's shares. But it's more likely he will continue his guerrilla warfare, hoping to force Eaton and Co. to take steps that add to the $1 billion in paper profits he has already earned on his Chrysler stake. That's called a poker face. Something else they teach in Vegas.

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