Viacom Rises on Rumors of Kerkorian Interest

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By Cory Johnson
Staff Reporter

Rumors swept Wall Street on Thursday that billionaire

Kirk Kerkorian

-- CEO of

MGM Grand

(MGG)

and onetime suitor of

Chrysler

(C) - Get Report

-- was in the hunt again, this time for

Viacom

(VIA) - Get Report

.

And whether the tales were true, or just believed to be so by enough Kerkorian followers, Viacom stock rallied: VIA shares were up 2 1/8 to 28 3/4, after the destruction of

April 22 when the company reported deepening problems with its

Blockbuster

unit. On that day alone, the stock was off 10%.

CNBC

also reported that Kerkorian was rumored to be unloading Chrysler to finance his purchase, but shares in the auto maker closed unchanged Thursday at 30. Wednesday, however, Chrysler fell 3/8 on twice its normal trading volume, although the overall market was up big. Kerkorian has declined to comment on what his office called "market rumors."

Nonetheless, the rumor was the talk of the Street on Thursday. "It would not be the least bit out of character for Kerkorian to do something like that," says Dennis Forst, a gambling analyst for brokerage company

McDonald & Co.

But Forst added that he didn't know if Kerkorian is actually buying shares of Viacom.

Kerkorian, 79, might be the only man on the Street who doesn't think Viacom CEO

Sumner Redstone

, 74, is too old to turn the troubled company around. But the chances that Kerkorian could use his clout as a major shareholder to force changes in the corporate board of Viacom are slim to none -- despite the practice he had using similar techniques on Chrysler two years ago. Redstone holds a reported 80% of Viacom's class A preferred shares, the only shares that hold voting power.

Is a takeover in the works? Viacom is sitting on some $10 billion in debt and, despite its depressed share price, some doubt whether anyone would want to acquire such a burden.

Kerkorian has, however, been taking all sorts of steps to boost the value of MGM and spending plenty of money to do so. On Monday, Kerkorian agreed to buy all of the film and television units of

Metromedia

(MMG)

from billionaire

John Kluge

, Metromedia's CEO. For his $573 million in cash, Kerkorian will get Metromedia's entire 2,200-title film and television library,

Orion Pictures

,

Goldwyn Entertainment

and the

Motion Picture Corp. of America

studios.

But few could decide if that meant Kerkorian was more or less likely to acquire the heavily indebted Viacom. Even the dependably glib

Smith Barney

entertainment analyst Jill Krutick, whose firm has done underwriting for Viacom, said, upon hearing the rumor, "Oh."