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Thursday, August 24, 2006

Ford Won't Go Private

USA Today reports that the Ford family is considering taking the auto giant private.

Unlikely. Ford has a market cap of about $15 billion and a share price that hovers around $8. The company also has a large debt load and an underfunded pension. But, the company has over $2o billion in cash.

Investors who bought the company two years ago, especially institutions, are unlikely to let their shares go at under $10. That would drive the cost of any buyout up substantially. A price much below that would almost certainly bring a rash of shareholder suits.

In addition, if the Ford family announced that it was taking the company private, it would probably open itself up to bids from other car companies, which could include Nissan and Renault, if their talks about a global alliance with GM falter. As fudiciaries, the Ford board of directors would have no choice other than to entertain competing bids.

With Ford in trouble, it may still need access to the capital markets. As a private company, that would be much more difficult.

Ford going private. Dream on.

Douglas A. McIntyre can be reached at He does not hold shares in companies he writes about.

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