Financier: Buying Stake in GM

Friday, August 18th 2000, 12:00 am
By: News On 6

DETROIT (AP) — Financier Carl Icahn, famed for taking stakes in companies and pushing for widespread changes, has notified General Motors Corp. that he intends to buy more than $15 million of its stock. GM's stock price jumped more than 5 percent.

GM said Friday that Icahn told the company he would buy an amount of stock amounting to less than 15 percent of outstanding shares. In a statement, GM said it announced the move to stay within federal rules governing a $1.4 billion share repurchase program.

In the 1980s, Icahn became known as a corporate raider, profiting handsomely through investments in Texaco Inc., USX Corp. and Phillips Petroleum Co. He bought Trans World Airlines Inc., which was later sold.

Earlier this year, he set the stage for the eventual multibillion-dollar sales of Nabisco Group Holdings Corp. and the food company it controls, Nabisco Holdings, the maker of Oreo cookies and Ritz crackers, by offering to buy Nabisco Group.

Icahn, who owned 9.6 percent of Nabisco Group, said in March he was prepared to buy the rest for $13 a share. In late June, R.J. Reynolds Tobacco emerged as the winner of Nabisco Group with an offer of $30 a share, or $9.8 billion.

GM executives have long contended that their stock is underpriced by Wall Street. As the world's largest company, GM has a relatively small market value of $36 billion, based on Friday's opening share price.

GM shares shot up $3.75 a share, or 5.7 percent, to $69.188 in morning trading on the New York Stock Exchange after the announcement of Icahn's interest.

In addition to the stock buyback, GM earlier this year gave its stockholders $9.8 billion in shares of Hughes Electronics in return for $6.8 billion in regular GM stock.

Hughes shares are tracking stocks, which reflect financial performance but do not represent any ownership stake in the company.

Some investors have pushed GM to spin off Hughes, a wholly owned subsidiary of GM, as a separate company. But GM Chairman Jack Smith and other top executives have said Hughes technology provides a competitive advantage in the auto industry.

Icahn was not immediately available for comment. A GM spokeswoman declined to comment on possible motives for Icahn's purchase.

``We feel our stock is undervalued,'' GM spokeswoman Toni Simonetti said. ``It's easy to understand why there are investors out there who see it as an attractive investment.''